Government backs down on backpacker tax

Responding to industry pressure, the Federal Government has announced a drop in the proposed new backpacker tax. Working holidaymakers will be taxed 19% on every dollar earned up to $37,000, much less than the originally proposed 32.5%. Despite the cut, the revised tax package is hardly an incentive for working holidaymakers to come to Australia.
 
For the typical backpacker, paying 19% tax from dollar one means their earnings will be cut by about one fifth. Currently, a backpacker will generally work for 8-9 months of their year, travelling and spending for the rest of the time. The drop in income will seriously hamper their ability to do this.
 
Backpacker numbers have fallen 17% since 2012-13, prompting the Government to promise $10 million to improve Australia’s reputation as a working holiday destination. Reducing back packer earnings, however, will have the opposite effect and discourage holidaymakers to come to Australia. The revised scheme also places more financial burden on employers. The Government will take 95% of super payments when the back packer leaves the country, effectively creating a tax on employers who pay those superannuation charges for employees.
 
The hospitality industry relies heavily on backpackers. All of Edupi’s clients use working holidaymakers in one way or another. For instance, back packers make up 11% of the workplace of one of our larger clients. Given the massive shortages of chefs and venue managers in Australia, this will only exacerbate staffing challenges for our industry.
 
The proposed tax changes do require legislation, so they are not immediate. Once legislated, we’ll watch closely to assess the impact on the hospitality industry. All employers will have to register to employ working holidaymakers and this will be published on the ABN lookup page.
 
If you have an excellent working holidaymaker in your business, it may be worth assessing their eligibility to apply for a 457 visa to continue their employment with you. Once they’ve lodged their application they can also apply to extend the 6-month work restriction whilst awaiting a decision on their visa.
 
For expert help and advice please contact Edupi today on 02 9235 0919