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Australian Tourism Industry Condemns 'Holiday Tax'

by Mary Swire, Tax-News.com, Hong Kong

30 September 2016


Industry association Tourism and Transport Forum Australia (TTF) has condemned the Government's decision to increase the Passenger Movement Charge as a "blatant cash grab."

In July 2017, the PMC will be increased to AUD60 (USD46) for all passengers departing Australia. The measure forms part of a package of reforms designed to recoup the revenue that will be lost as a result of the Government's decision to cut the so-called "backpacker tax" from 32.5 percent to 19 percent.

Margy Osmond, CEO of TTF, said that the tourism industry had been "completely blindsided" by the PMC hike. She added that the measure had not been flagged during discussions with the Government and that it "is a bitter disappointment that we've been slapped with this tax hike on every traveller – Australian or international visitor – heading overseas."

As part of Budget 2016, the Government had proposed to reform the tax residency rules to treat most working holiday makers temporarily in Australia as non-residents for tax purposes, meaning that they would no longer be able to access the tax-free threshold. The aim had been to "ensure that these people are taxed at 32.5 percent from their first dollar of income up to AUD80,000."

However, following a backlash, the Government has now agreed to set the rate applying to working holiday makers at 19 percent on earnings up to AUD37,000, with ordinary marginal rates applicable after that threshold. The new rate will apply from January 1, 2017.

Osmond said that while she is disappointed that the Government will push ahead with the backpacker tax, "19 percent is a lot better than 32.5 percent." She also welcomed the proposed extension of the age limit for working holiday makers from 30 to 35 and the reduction to the cost of a working holiday visa.

TAGS: tax | air passenger duty (APD) | Australia | tax thresholds | travel and tourism | ministry of finance | tax rates | tax reform | trade association | trade | individual income tax

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