Canberra reaches deal on holiday workers' tax

Compromise of 15% tax on seasonal workers reached, down from initially proposed 32.5%

SYDNEY • Foreigners in Australia on working holidays face paying a 15 per cent levy on every dollar they earn, after the government compromised on a controversial "backpacker tax" and dumped plans for a higher rate.

The Liberal-National coalition government of Mr Malcolm Turnbull had initially sought a revenue-raising 32.5 per cent tax for seasonal workers, starting from Jan 1 next year, under a proposal first flagged in last year's budget.

But the move sparked an outcry from farmers and tourism operators, who feared it would deter young tourists from travelling to the country. Their concern was matched within the government coalition by many of its National Party MPs who represent rural districts.

Some 600,000 backpackers head to Australia yearly, many finding work picking fruit. Currently, like other workers, backpackers do not start paying tax until their annual income exceeds A$18,200 (S$19,400).

Farmers complained bitterly that the levy could affect labour supply at harvest time, and in September the government watered down its plans to 19 per cent.

That led to a stalemate with the Labor opposition, the Greens and independent cross-bench senators demanding a 10.5 per cent tax, in line with New Zealand.

But Treasurer Scott Morrison said yesterday a compromise had been reached with cross-benchers who hold the balance of power in the Senate.

"Today the government will be working to put in place a Bill which will propose 15 per cent on the backpackers' arrangement," he told reporters, voicing with confidence that the government now had the numbers to steer it through Parliament. He said the reduced rate would cost the federal budget A$120 million over four years

Key to the government's success were the four cross-bench senators of the One Nation Party, led by anti-immigration campaigner Pauline Hanson. One Nation agreed to the proposal of 15 per cent but floated the prospect of a reduction to 12 per cent at a later date - an idea dismissed by Mr Morrison.

Still, Senator Hanson said One Nation welcomed the government's decision to compromise at 15 per cent: "Most importantly, this is a win for farmers, small business and tourism, but this is also a win for One Nation and a win for common sense."

Farmers groups were grateful the issue looks set to be resolved.

"It has been a painful process, but we wholeheartedly welcome the announcement that a compromise rate of 15 per cent has been reached," said National Farmers Federation chief executive Tony Mahar.

"We now ask that the Senate expedite the passage of the relevant legislation to provide the long-needed certainty to the sector, and allow businesses to start rebuilding backpacker interest in on-farm jobs."

However, the federation's workplace relations general manager Sarah McKinnon criticised politicians on all sides for delays in reaching a compromise."There is no question that no party has covered itself in glory on this issue," she told Australian Broadcasting Corporation news.

"It has been a disappointment. Farmers are let down by the political process that has seen games come ahead of the public interest."

The opposition Labor party's agriculture spokesman Joel Fitzgibbon argued 15 per cent was still too high.

"All backpackers do is look at the headline rate," he said.

"They look at New Zealand at 10.5 and Australia at 19 or 15 and they decide to go to New Zealand."


A version of this article appeared in the print edition of The Straits Times on November 29, 2016, with the headline 'Canberra reaches deal on holiday workers' tax'. Print Edition | Subscribe