The Australian government has announced it will drop its proposed 32.5 per cent tax rate for working holiday visa holders to 19 per cent following widespread backlash from Australia’s agriculture and tourism sectors.
The government introduced the so-called ‘backpacker’ tax in last year’s budget, which would see working holiday visa holders, mainly backpackers, taxed as non-residents from 1 July 2016.
The changes would see the tax-free threshold for backpackers earning under $18,200 scrapped, with backpackers to be taxed at 32.5 per cent from the first dollar earned, which the government said would bring in A$500m from the higher tax rate.
The tax was delayed, however, with the government announcing a review of the budget measure following widespread criticism, including that the tax hike would deter backpackers from coming to Australia.
Fruitnet understands the compromise will see the tax rate dropped to 19 per cent from the first dollar earned from 1 January 2017, with the lower tax rate to be offset by a $5 increase to departure taxes – the first change since 2012.
The government has also announced a A$10m package for the tourism industry to promote backpacker jobs.