Government modifies backpacker tax – October 2016

Filed under: Economy and Finance, Tax, Politics, Foreign Affairs,

Treasurer Scott Morrison has announced major changes to the controversial backpacker tax.

The tax rate for working holiday makers will be set at 19 cents in the dollar on their first $37,000 of earnings rather than the 32.5 cents announced in the Budget.

To partly offset the revenue loss from the change the Government announced a $5 increase to $60 in the Passenger Movement Charge (departure tax).

Mr Morrison said the Government recognised that working holiday makers were an important part of Australia’s $43.4 billion tourism industry and a key source of labour, particularly in the agriculture, horticulture, tourism and hospitality sectors.

“We also recognise, as do stakeholders, that working holiday makers should pay fair tax on their earnings.”

He said Cabinet had approved the following changes:

  • From 1 January 2017 the Government will set the tax rate applying to working holiday makers at 19 per cent on earnings up to $37,000, rather than the 32.5 per cent announced in the 2015-2016 Budget, with ordinary marginal tax rates applying after that.
  • The Government would also reduce the application charge for working holiday maker visas by $50 to $390.

“We will also seek to boost the arrivals of working holiday makers, which have been in decline since 2012-13 as a consequence of factors including exchange rate variations and changed economic conditions in source countries,” Mr Morrison said. “We will introduce more flexible arrangements to benefit working holiday makers (WHMs) and industry, allowing an employer with premises in different regions to employ a WHM for 12 months, with the WHM working up to six months in each region.

“In addition, we will task Tourism Australia to promote Australia to potential working holiday makers through a $10 million global youth targeted advertising campaign.

“To generate more accurate data and boost integrity of the scheme by preventing exploitation of working holiday makers, their employers will be required to undertake a once-off registration with the Australian Taxation Office.

“The Government will increase the tax on working holiday makers’ superannuation payments when they leave Australia to 95 per cent. This is consistent with the objective of superannuation, which is to support Australians in their retirement, not to provide additional funds for working holiday makers when they leave Australia.

“There will also be a one-off increase to the Passenger Movement Charge of $5 from 1 July 2017.

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