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Australian Treasurer Explains New Backpacker Tax Rules

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

06 December 2016


The Australian Government has explained how its new 15 percent backpacker tax regime will work.

The Australian Government last week reached an agreement with the Green Party to lower the proposed tax rate for working holiday makers from 19 percent to 15 percent. Legislation to implement the rate was passed by the Senate on December 1, by 43 votes to 19.

Treasurer Scott Morrison explained that the tax rate for 417 and 462 visa holders will now be set at 15 percent from January 1, 2017, consistent with the rate applicable to visa holders under the Seasonal Workers Program. The 417 visa is available to those aged over 18 and under 31 who wish to holiday and work in Australia for up to a year. The 462 visa is applicable for individuals holding passports from certain countries, including Argentina, China, and the US.

In addition, the Departing Australia Superannuation Payment rate for 417 and 462 visa holders will be set at 65 percent, rather than the 95 percent the Government had previously proposed.

Morrison said that these measures will contribute AUD560m (USD415.5m) net to the Budget, "almost 74 percent of the revenue the original Budget measure would have raised over the current forward estimates [period]." The Government had originally intended to tax backpackers at 32.5 percent from July 2016.

"These new arrangements will ensure that the Australian agriculture, horticulture, tourism, and hospitality sectors, as well as other industries in regional areas, can have a competitive tax rate for working holiday makers that does not compromise other important visa classes such as those under the Seasonal Workers Program," Morrison stated.

The Australian Chamber – Tourism welcomed the end to an 18-month political deadlock, but warned that the Government appears to be treating the tourism industry as a cash cow.

CEO James Pearson said: "Resolving the backpacker tax issue has involved a tax on backpackers that means the vast majority who previously claimed the tax-free threshold will now pay 15 cents in the dollar. It has also involved an additional AUD100m per year tax on international travellers, in the form of the AUD5 increase in the Passenger Movement Charge announced without any consultation or assessment of the impact."

"While we welcome the settlement of the issue by the Parliament, the process has dealt a blow to tourism and the visitor economy. As a major source of export earnings, tourism should be treated as a hero rather than as a cash cow."

Fiona Simson, President of the National Farmers' Federation, said the outcome was "a victory for common sense."

TAGS: individuals | tax | pensions | air passenger duty (APD) | Australia | China | tax thresholds | ministry of finance | United States | tax reform | trade association | trade | individual income tax | Argentina

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