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Australian Labor Party Proposes Lower Backpacker Tax Rate

by Mary Swire,, Hong Kong

08 November 2016

The Australian Labor Party has said that it will move amendments in the Senate to lower the proposed backpacker tax from 19 percent to 10.5 percent and oppose the planned increase to the Passenger Movement Charge (PMC).

Shadow Treasurer Chris Bowen announced that the Labor Party will not support what he described as the Government's "backpacker tax debacle."

Bowen pointed out that backpackers working in New Zealand pay tax at 10.5 percent from their first dollar. "Setting our tax rate at the same level will ensure Australia remains a competitive and attractive destination for working holiday makers," he said.

Bowen also emphasized that Australia "already has the second-highest departure tax in the world after the UK Air Passenger Duty."

Legislation is currently before Parliament to introduce a so-called "backpacker tax" that will treat most working holiday maker visa holders as non-resident for tax purposes. If passed, it will mean that from January 1, 2017, working holiday makers cannot access the AUD18,200 (USD14,017) tax-free threshold available to Australian residents. They will be taxed at 19 percent on earnings up to AUD37,000, with ordinary marginal rates applicable after that threshold.

The Government had originally intended to introduce a 32.5 percent rate from July 2016, but amended its proposals following a backlash. To offset the impact of reducing the backpacker tax to 19 percent, the Government intends to increase the PMC for all passengers departing Australia from AUD55 to AUD60 from July 1, 2017, and to increase the tax on working holiday makers' superannuation payments when they leave Australia to 95 percent.

Bowen said: "We believe the Parliament has a unique opportunity to provide certainty to the economy, to the agriculture and tourism sectors in particular, by supporting Labor's proposals."

TAGS: tax | air passenger duty (APD) | Australia | United Kingdom | tax thresholds | travel and tourism | tax rates | New Zealand | tax reform | individual income tax

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