SYDNEY (AFP) - Australia watered down plans for a "backpacker tax" on foreigners on working holidays, after an outcry from farmers and tourism operators.
Canberra had been under increasing pressure to shelve the tax - 32.5 cents for every dollar earned - amid fears that it would deter tourists from choosing the country as a destination.
Some 600,000 backpackers travel to Australia every year, many of them finding work picking fruit, and farmers had complained bitterly that the tax could affect labour supply at harvest time.
"We recognise absolutely the important part that backpackers play in the overall tourism industry," Treasurer Scott Morrison told reporters in Canberra on Tuesday (Sept 27).
"It is an important sector for the tourism industry, also a very important source of labour in the agricultural sector, particularly for seasonal labour."
Mr Morrison said the visa application for working holidaymakers would be cut by A$50 (S$52) to A$390 (S$405).
Under the new proposed tax set to be in place from Jan 1, 2017, backpackers would be levied 19 per cent on earnings from the first dollar made.
Currently, like other workers, backpackers do not start paying tax until their annual income exceeds A$18,200.
Mr Morrison said the loss in projected government revenue of an estimated A$540 million over the next three years would be made up via a A$5 rise in the departure tax for all passengers leaving Australia.
Backpackers will also be hit with a 95 per cent tax on their superannuation (pension) accounts when they leave Australia.
The tourism sector will meanwhile be given A$10 million to market Australia to backpackers, who are often young and work in agriculture and hospitality.
"Farmers across the nation are today breathing a sigh of relief following the announcement," the National Farmers' Federation said in a statement.
"We have consistently said agriculture simply cannot do without backpackers," president Brent Finlay added.
"The nature of these types of working arrangements is that farmers need an immediate, temporary workforce and backpackers want immediate cash in their pockets to spend while travelling - so the approach taken makes sense."