Government backtracks on working holiday maker tax

It seems rational heads have prevailed. This week Treasurer Scott Morrison announced the intention to reduce the tax paid by working holiday makers from 32.5 per cent to 19 per cent for every dollar earned up to $37,000, with normal tax rates applying thereafter. This will begin on 1 January 2017 should it be approved by Parliament, and represents a quick turnaround from the 2015-16 Budget measure that increased the tax to its current level. To offset this, there will be increases to the Passenger Movement Charge, a charge applying to anyone leaving Australia, and the Departing Australia Superannuation Payment, which is a payment for former temporary visa holders who wish to claim any superannuation once they have left Australia provided they are not Australian or New Zealand citizens or Australian permanent residents.

Working Holiday Makers are those who hold either a Working Holiday (subclass 417) visa or a Work and Holiday (subclass 462) visa.

As previously written there are many benefits to such a reduction, however, the obvious aim is to attract more working holiday makers to Australia. To assist, the visa application charge will also be reduced by $50 to $390.

Working holiday makers are vital to Australia’s agricultural sector as many Working Holiday (subclass 417) visa holders choose to work in these industries. A primary reason is because it is one of a few specified work activities that must be done in a regional area for at least three months in order to consider applying for a second Working Holiday (subclass 417) visa. The definition of regional area was updated two weeks ago to add a couple more postcodes in Western Australia.

“Backpackers” as they are commonly known have been reported to make up to 25 per cent of the farm workforce each year, and a substantial 85 per cent of farm labourers in the Northern Territory. As part of increasing compliance and reducing chances of worker exploitation, employers will need to register with the Australian Taxation Office, otherwise they will be required to withhold tax at the current rate of 32.5 per cent for those workers. There will be a public register available to confirm which employers are registered.

There are also proposed further changes to working holiday visas to make the programme more flexible such as providing for longer periods of employment in certain regions, however, any substantive intentions have yet to be announced.

Hopefully further measures will be introduced to stem the declining numbers of working holiday makers coming to Australia. It seems Australia needs them more than they need Australia.