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'Backpacker Tax' Would Cut Australian Visitor Numbers

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

23 August 2016


Australia will become a less attractive destination to travellers if the Government presses ahead with its plans for a "backpacker tax," according to a new study by Monash University.

The Government this month launched a review of working-holiday-maker tax rules. It fulfils pre-election commitments made by the Government in response to the backlash against its proposal to reform the tax residency rules to treat most working holiday visa holders temporarily in Australia as non-residents for tax purposes. This would have prevented such individuals from accessing the tax-free threshold, meaning that those affected would have been taxed at 32.5 percent on income between AUD1 (USD0.76) and AUD80,000.

The research was conducted by Dr Jeff Jarvis at Monash University's National Centre for Australian Studies, and budget accommodation network YHA, and concerned the motivations of working holiday makers. Nearly two-thirds (60 percent) of those questioned said they would not have travelled to Australia if they faced a 32.5 percent tax rate, and 57 percent said they would spend less time travelling in the country if the changes were to take effect. In addition, 70 percent said that they would look for cash-in-hand jobs to avoid the so-called "backpacker tax."

The research also concluded that New Zealand would benefit from the changes, with 62 percent of those surveyed saying that, had the Australian tax been in effect, they would have considered taking a working holiday in New Zealand instead. Canada was likewise identified as a major competitor, with 53 percent considering it an alternative destination. The number of those willing to recommend Australia to fellow working holiday makers was just 22 percent, compared with 75 percent prior to the changes being announced.

Jarvis said: "It is clear that the proposed tax changes will have a significant impact on potential demand for Australia as a backpacker destination, with 60 percent of working holiday makers surveyed indicating that they would not have come on such a visa if the tax rate was 32.5 percent. In addition, only just over one-fifth of travellers would recommend to their friends to come to Australia on a working holiday maker visa and 57 percent would spend less time travelling around Australia. That means there would be a significant impact, in particular on regional tourism economies."

TAGS: individuals | tax | budget | Australia | tax thresholds | tax rates | Canada | New Zealand | tax reform | individual income tax | Work

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