Guest Post: Backpacker tax changes to hurt tourism and farming

May 20th, 2015 | | industry

Craig Gorton2By Craig Gorton

In the latest Australian Government Federal Budget, Treasurer Joe Hockey announced that from July 1, 2016, working holiday makers will be taxed at 32.5% from their first dollar earned.

The average working holiday-maker earns about $36,000 a year. So what does working holiday-makers no longer being able to claim the tax-free threshold of $18,200 actually mean for the average traveller in Australia?

Under current tax laws, if a working holiday-maker stays in Australia and is in one place for six months or longer, they are deemed a resident and therefore able claim the tax-free threshold. What this means from a financial perspective is that on average they claim tax back of about $2400.

The full extent of these recent announcements are yet to be seen but when also combined with the increase in visa application fees in recent years (now a world high $440), Australia may well see far fewer working holiday-makers in the future.

Countries such as Canada and New Zealand, which are also a popular working holiday destinations, are experiencing accelerated numbers of these tourists.

Consequently there is a considerable impact to the fruit-picking and farming industries which rely heavily on this section of the community for flexible labour. This may well have ramifications across the leisure and tourism industry, particularly in those rural areas, but also around Australia due to lower spending levels from these widely dispersed tourists.

Based on the announcement, the changes will not impact tax returns lodged by backpackers for the years ending June, 2015 or June, 2016.

Working holiday-makers currently in Australia may therefore be less concerned with this unless they are considering applying for a second-year visa and working in Australia from July 1, 2016 onwards.

Craig Gorton is co-founder of a specialist in tax and superannuation services for travellers working in Australia.

Edited by Chris Harrison

18 Responses

  1. Wayne Todd says:

    Hi, I’m a British backpacker travelling Australia. My visa runs out on the 29th of July, which means it’s likely I’ll be working at some point during the tax changes. How will this effect me i.e. Will I still be eligible to file a tax return or will I owe the Australian government tax? Any information would be greatly appreciated.
    Regards Wayne

    • Chris Harrison says:

      Hi Wayne, I have contacted the writer and invited him to answer your question (as a tax expert), I will monitor the post for his reply. Regards Chris

  2. Craig Gorton says:

    HI Wayne, to answer your question, up until the 30th June 2016 your tax liability and therefore potential refund will remain the same as previous years. However post 1st July 2016 your tax obligations may change and you’ll need to make sure you are paying the correct tax rate of 32.5%. Note. this bill is not yet passed and therefore not in place as yet -watch this space-. You may still be able to claim a tax refund once you leave for tax year 2016/17 if you have incurred expenses. Please visit our site for further information
    Thanks, Craig

  3. Suzi says:

    A question for Craig: As an employer of backpackers, and assuming the legislation will pass, how will we differentiate between a temporary worker and a worker who is allowed the Tax Free Threshold? Will the ATO be issuing TFN’s to backpackers that will be flagged on our payroll software?

    At the moment backpackers claim their refund even if they are not entitled to it (haven’t been in one spot for six months) but they tick they are a Resident for Tax Purposes in the Tax File Declaration form and when they apply for a refund say they are residents. This seems to by-pass the scrutiny of the ATO. What will happen now? Any idea?

    And what do you think the probability is of this bill not actually being passed?

  4. Dan says:

    Hi Craig,

    When does the Parliament make the final decision about the planned tax law?

  5. Bruce jacobs says:

    I don’t have a problem with backpackers fruit picking it’s hard yakka and I think thay deserve all thay get
    It’s the backpackers on Sydney and Melborne construction sites flaunting
    The Law ,and there employers getting cheap labour that hits a nerve
    With me

  6. Hi Ken, (Federal Member for Flynn)
    I really want to congratulate you and the rest of your compatriots in Canberra for the most incredible bit of stupidity I have ever seen the Liberals pull…of course I am talking about this 32.5% taxation on the first dollar that a backpacker earns in this country.
    Well done mate…..they are staying away in “droves”.
    I estimate that my numbers are down by 40% this year…you have single handedly crucified both the tourism industry and the agricultural industry who cannot survive without these seasonal workers.
    I have always thought the Liberals and National party to be the lesser of two evils in Canberra and elsewhere… Labour are so incompetent that they mostly get caught when they are corrupt….your lot are mostly better fiscal managers and cover their tracks better.
    Well this time you have really “screwed the pooch” and you are going to have a whole lot of us from at least two industries pointing the finger at you.
    What kind of idiots do you employ in Treasury who advised you that this one was going to work?
    Heads will roll over this one….best make sure it is not yours!

    • Hi there folks,

      This really is devastating news. I am on a WHV and I agree that a lot of backpackers do’t pay any tax because they earn under the threshold and claim it back. However, some earn over and therefore do pay and while they are here they spend money on groceries, services etc, contributing to the economy. They are also likely to spend a large sums of money on tours that boost the Australian economy even further – the tourism industry needs this! Anyway, making WHV holders pay their fair share (maybe a lower threshold with the 19c rate still in place) makes sense, but changing to 32.5% in every dollar is madness and actually robbery!


      SAYS ‘The committee will table an interim report to the Senate on 14 October 2015. The reporting date has been extended to 25 February 2016. On Monday 22 February, the Senate granted an extension of time for reporting until 17 March 2016. ‘




  7. Natalie says:

    Hi guys

    Is there anymore developments on this? I can’t seem to find anything?


  8. Chris Harrison says:

    The decision is with the government and the treasurer, no final decision has been taken, this is the latest –

  9. Anna says:

    I imagine that most working holidaymakers are, like me, working in casual and low wage jobs. Who in their right mind is going to stay and work on those terms? If the proposed changes go ahead, many working holidaymakers will leave before their visa expires, many more will switch to working for cash. Is that what the government wants?

    In addition, what thanks is this tax hike to the people who have already done their 88 days of specified regional work? Said work is often unpaid, always gruelling and truly a service to Australia. If this work has been undertaken in good faith, to change the terms of the stay that has been earned after the fact is a pretty low move.

  10. Willliam yu says:

    Hello guys, I’m a student from korea who’s going to Australia this December on Working holiday visa. I’ve been wondering if the New tax law will be removed or not
    I’ve been planning to come to Australia for a year because I gotta graduate my highschool first.
    I was glad to hear that the new tax law will be put off till January 2017, and many experts said that it’d be canceled somewhen.
    So I’ve relaxed back then but I’m afraid if the tax law will be available during my visa.
    guys, in your opinion, do you think it’d loosen or be canceled later?
    I’m still on the fence if I have to choose other country, but there’s no any other which has as good condition as australia for my purpose of working holiday and
    I’m gonna study in New Zealand sometime, so I’ve wanted to get used to Aussie accent first because I’ve heard that both Kiwi and Aussie accents are similar
    Ahhh I don’t know what can I do… I’ve planned a lot for a long time

    • Chris Harrison says:

      If any Liberal or National politician needed to wonder if this policy was having a direct impact on WHV decision-making and making “less” people choose Australia at this time they only need read the above comment.

      Do the right thing!! Make an early and reasonable decision.

      This tax cannot and will not generate the tax revenue that the former Treasurer proposed. It is now reducing or limiting the number of tourists coming to Australia. Thereby negatively affecting our GDP.

      Will they cancel this policy, AKA remove this tax William? Your guess is as good as ours.

      They live in another world – one called ‘Canberra’.

      We, the Australian WHV sector, hoe we see you and many more like you.

  11. John George says:

    Chris I think it is wrong to say they live in another world, one called Canberra. They don’t, they live amongst us, amongst the audience that reads this forum, and it requires all of us to continue to lobby ‘our’ politicians to understand the impact the introduction of this tax will have.

    If your local MP or Senator has not expressed a strong view on this issue make them have one by telling them the cost to their electorates … do your sums, a backpackers wages in a week, the number of them in your area, the money they spend on accommodation, on food, on alcohol, on clothes, transport, restaurants … all these translate into local jobs and those jobs will decline if backpacker numbers decline.

    For Mildura I estimate 450 backpackers on average are working every day, earning $80 per day, an economy generating $16m a year. Accommodation can account for $4m, leaving $12m of disposable income. Cut that by 50%, by 75% and Mildura gets an economic hit it has never seen before.

    Tell your local paper the impact on your area, tell your politicians, tell the check out workers in the supermarkets, the pub bar staff … because its their jobs that will disappear.

    • Dave says:

      450 backpackers earning $80 per day does not equate to 16m per year, even if they work 7 days a week 365 day a year!

      • Lets not quibble Dave … often they do work 365 days for the time they are here … harvesting fruit crops does not stop at weekends mate!
        And that equates to $13.14 Million a little less than $16 Million … not by much!

        If the number of backpackers were slightly more (and John was speaking in general terms) then the number would be $16 million!
        Or if we generously allowed the backpackers to have $97.41 a day for a hard days slavery in the hot sun … well probably the biting cold down that way at the moment … then it would equate to $16,000,000 exactly! 🙂

        And now our government wants to take $31.66 from this magnificent salary!

        You cannot be serious … there will be a stampede for New Zealand or Canada.

  12. John says:

    I don’t understand why Backpackers come under the umbrella of Tourism. Surely they are quest workers and are not like other tourist who bring money from abroad and put into the system here, where as Backpackers earn Australian dollars and in the main turn it over here and if they are fortunate some may take a small amount of these dollars out with them, So where are they of any great benefit, if they are fruit pickers they certainly don’t contribute to bringing the prices down here.

    Certainly they are needed here but only because there are far too many Australians who are to lazy to do that or any other type of work. The only way in which they should be taxed is on what they take out of Australia and that I’m sure would be a pittance and not worth the time and effort.

    I am a very old man and have seen young people coming to this country for many years and in the main they are a happy group who are more interested in expanding their horizons. Money for many of them is not such a big deal, as long as they have food in their belly’ and somewhere safe to sleep while they enjoy this wonderful country, it’s more to with lifestyle.