Backpackers are vital in providing labour for many farmers across Australia.
Backpackers are vital in providing labour for many farmers across Australia. Brett Wortman

YHA: Backpacker tax laws delayed, but we want them dead

THE $500 million "backpacker tax" may be on life support after reforms were delayed until January, but Australia's largest group of youth hostels wants the government to pull the plug.

News that Small Business Minister and Assistant Treasurer Kelly O'Dwyer would put tax changes for backpackers on ice until next year have not been enough for YHA, which has 88 hostels dotted across the country.

YHA chief executive Julian Ledger said it was not good enough to delay the changes, because that still bred uncertainty for businesses and farmers.

"Australia has had a great reputation as a working holiday maker destination and the scheme has been an important driver of youth tourism, " he said.

"However Australia is one of many options.

"There is now a big repair job to be done in regaining the trust of working holiday makers here in Australia and secondly to broadcast the information to the major source markets.

"Working holiday makers plan their trips well in advance and damage has been done."

YHA is calling for Tourism Australia and state tourism groups to spread the word through advertising campaigns to let would-be travellers know they will not be affected.

A report commissioned by YHA suggests a 10% drop in working holiday makers travelling to Australia would amount to a $350 million loss to the economy.

OUR SAY: Turnbull's clumsy tax grab


Backpacker tax put on hiatus as government reels from backlash

THE Coalition's controversial backpacker tax looks dead in the water following a backlash in regional areas from farmers and tourism operators.

Small Business Minister and Assistant Treasurer Kelly O'Dwyer announced on Tuesday the tax would be delayed until at least January 1.

Ms O'Dwyer promised there would be a full review of the tax which would be considered by Cabinet in October or November this year.

"Let me make it very, very clear, there is a comprehensive, whole of government review that is being conducted,'' Ms Dwyer told reporters.

"It's being conducted to look at the broader issues, not only to do with working holiday makers, but more broadly to look at the agricultural sector, our rural and regional communities and whether or not they have the right labour force in place to deal with the seasonal issues that occur with fruit picking and with the availability of workers that can be such a struggle for many of them in remote parts of the country.''

Ms O'Dwyer denied the government had failed to properly consult on the issue.

"Very clearly the Government has listened to rural and regional communities, the Government's listened very much to those in the tourism sector that have raised these concerns.

Ms O'Dwyer was asked whether it was a shock to her "when Bill Heffernan warned you in a meeting of Coalition back-benchers that he would go a little bit stir-crazy on this issue because they hadn't been consulted properly before the tax was announced?"

"Nothing that Bill Heffernan does shocks me and I suspect it doesn't shock any member of the Australian public,'' she replied.

The Minister denied delaying the tax would only create uncertainty for backpackers deciding whether or not to come to Australia for a working holiday in 2017.

"It gives them absolute certainty to know they can come to Australia, they can work here, they can travel around Australia and really take advantage of all that Australia has to offer,'' she said.

"What I can say to them is that the government has announced they will not be treated as non-residents for tax purposes for the next six months.

"It will have a budget impact, I can tell you it will be around $40 million (six month delay - lost revenue from $540 total - over four years).

The review would examine the proposed tax rate and how Australia could continue to be globally competitive in attracting workers.

The Opposition has yet to commit to completely scrapping the tax but says it will consult with the industry.

Labor says the government has failed to consider the impact on farmers, who rely on backpackers for labour, and the tourism sector, who gain great benefits from the money backpackers spend in Australia.

The change would have seen backpackers taxed at a rate of 32.5 per cent tax on all earnings from July 1.

Working holidaymakers currently only pay tax on money earned above the $18,200 tax threshold.

Backpacker resort operators say news of the tax, announced in the federal budget, has already resulted in cancellations of forward bookings.

Backpackers are choosing New Zealand or Canada for working holidays instead, because of their lower taxation rates, the ABC reported.

The government has already been criticised for not taxing the big end of town enough, including the likes of Google and Apple.

It's budget includes tax breaks for those on salaries over $80,000 but little for poorer workers.

The ABC reported on the weekend that Treasurer Scott Morrison recently rejected proposals to tax backpackers at around 19 per cent, as well as suggestions the Government could withhold backpackers' superannuation and spend it on regional employment programs instead.

Labor says the government failed to think through the implications of the new tax but was more keen about banking the $540 million in savings over three years it would deliver.

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