The announcement that the Federal Government has backed down on the so-called ‘backpacker tax’ is a partial victory for the tourism industry.
Victoria Tourism Industry Council Chief Executive Dianne Smith said in response to the news; “The proposal to remove the tax-free threshold for Working Holiday Makers has already caused reputational damage to Australia as a destination and would have resulted in significant labour shortages for tourism and hospitality businesses across the country.”
“Lowering the proposed tax rate for Working Holiday Makers to 19 cents from the first dollar earned is a significant concession by the Federal Government. However industry will be very disappointed by the $5 increase to the Passenger Movement Charge,” she said.
Seen by many as an ill-conceived revenue-raising exercise, the proposal to tax Working Holiday Maker (WHMs) visa holders 32.5 cents in the dollar from the first dollar they earned was met with sharp criticism by the tourism and hospitality sectors.
A Deloitte Access Economics report on the Australian Tourism Labour Force found that international workers make up 10 per cent of total employment in the tourism sector, with half of these being Working Holiday Makers. In the accommodation, restaurant and cafe industries (key segments of the visitor economy), WHMs made up the largest component of international workers, at around six to seven per cent of the total employment.
“Our members who employ backpackers have been telling us that enquiries have dropped since the proposal was announced, and that there is a lot of confusion amongst travellers about what the tax changes would mean for them. As a result, many backpackers are choosing to go to New Zealand or Canada, who not only have more favourable tax arrangements for Working Holiday Makers, but also cheaper visa fees. Instead of raising revenue, this proposal is seeing Australia lose youth market share, and an important source of short-term labour,” Ms Smith said.
VTIC made a substantial submission to the Working Holiday Maker Visa review, calling for the proposal to be abandoned, and was heavily involved in the consultation process.
“One of VTIC’s key recommendations to the review was to provide marketing support to address the reputational damage done by this ill-conceived proposal,” Ms Smith said. “We have alienated many in the youth travel market. Now it’s time to win them back.”