Mar 16, 2016

Government must fix backpacker damage

The Government must outline its plan to restore confidence in Australia’s working holiday maker market following its admission that its backpacker tax will damage the tourism industry and reduce Australia’s market share.

Under current arrangements, working holiday visa makers can claim the tax-free threshold of $18,200. The Government announced in its 2015 Budget it would impose a 32.5% tax for working holiday makers from 1 July this year from the first dollar.

Working holiday makers are among the highest spending and longest staying visitors to Australia, with each spending an average of $13,000 and staying eight months, contributing more than $1.8 billion of expenditure to the economy every year.

On average working holiday makers in Australia earn $10,667 but spend $13,218, mainly on accommodation, transport, education and tourism. They are net job creators, with every five extra working holiday arrivals creating one new full time job.

Demand for working holiday visas has plummeted under the Coalition, with 10,000 fewer applications lodged in 2014-15 compared to 2013-14, and 17,000 fewer working holiday makers in Australia on 30 June 2015 compared to that day in 2014.

Any tax on working holiday maker earnings must be properly considered, designed, modelled and calibrated to ensure measures do not have a counterproductive effect on labour, jobs or tourism expenditure.

There also needs to be careful consideration to ensure a new regime does not simply result in working holiday makers being pushed into the cash economy, where no tax will be paid at all.

The challenge for Minister Colbeck now is to come up with an effective strategy to fix this problem created by the Coalition Government and come up with a credible new evidence-based policy supported by the sector which he purports to represent.