THE backpacker tax remains on course to hit 32.5 per cent on July 1, threatening the viability of agricultural producers due to fewer seasonal workers, after Treasurer Scott Morrison’s first budget failed to answer industry demands to ease the tax burden.
Last year’s federal budget unveiled the tax increase on working holiday markers that’s due to raise $100 million in the first year and $220m per year, over the following two years.
Under the 417 visa regime, working holiday-makers pay 19pc on earnings up to $37,000 and 32.5pc up to $80,000, with a tax-free threshold of $18,200.
But the July 1 increase will see a tax rate of 32.5pc applied with no tax free threshold.
Industry groups have pledged to make the backpacker tax an election issue after the budget failed to affirm a proposal between the agriculture and tourism sectors on a cost-neutral alternative, with a lower tax rate.
Mr Morrison said it was a sensitive time for the nation’s transitioning economy but this year’s budget represented an economic plan that included tax cuts for small and medium sized businesses.
“What we’ve said by ensuring we don’t increase the tax burden is that we think a dollar left in your pocket, is much better than a dollar put in the government’s,” he said.
“People will know from this budget, that when we get the opportunity to cut a tax we’ll cut it.
“We cut the mining tax; we cut the carbon tax; (and) we cut the banking tax.”
But on the unpopular increase to the backpacker tax, Mr Morrison said the matter was still under examination with an announcement set to be unveiled in the election cycle.
“There are no changes to that arrangement in this budget but it continues to be a measure that we’re working with the industry on and we will continue to go down that path,” he said.
“What is in this budget is not the final word on that matter.
“We’ve been liaising closely with our own members (of parliament) on that issue and we may well have more to say about that in the course of the next few weeks and obviously in the lead up to the election.
“I want to assure all those who have raised specific issues about this that the matter doesn’t conclude tonight.
“There is an ongoing process for that and we will continue to look at those issues very seriously.”
The National Farmers Federation launched a public campaign earlier this year and a petition that gained over 30,000 signatures, asking the government to soften the backpacker tax increase due to fears about impacts on agricultural workforces.
A proposal was submitted to cabinet for consideration following an interdepartmental review to find a revenue neutral alternative, but was rejected.
NFF President Brent Finlay said he’d heard similar talk that the government may reveal its plan on the backpacker tax in the near future after it wasn’t resolved in the budget.
But he said with a federal election call looming within days and the government to then go into caretaker mode, greater urgency was needed.
“We’ve already had one review and we don’t need another one but what’s the end game here?”
“Farmers need to know what’s going on because they’re in an absolute state of limbo.
“This is a massive issue not just for half a dozen farmers but farmers right across Australia; whether they’re planting cereal crops, or putting veggies in the ground or thinking about how they’ll be harvesting cherries or stone fruits.
“There’s real concern out there.”
Mr Finlay said farmers were caught in a “real bind” this year with projections fewer workers will be available to assist with production needs.
“This is a massive issue and we need not only the Treasurer involved but also the Deputy Prime Minister involved and Prime Minister involved, to try and sort this issue out as soon as possible.
Mr Finlay said he accepted backpackers had to pay tax when in Australia on working holidays but the government’s system needed to support them arriving.
“Normally we have about 40,000 backpackers coming to Australia each year but we need 60,000 each year however that doesn’t fix the labour shortages for agriculture,” he said.
“If we’re going to grow agriculture we need to see a plan somewhere in this election process on how we can increase the work force for Australian agriculture.”