No backpacker tax backflip

The National Farmers Federation has launched a new campaign, demanding the tax change for working holiday-makers - announced in last year’s federal budget - be softened.

The NFF and other farming sectors, including horticulture, have warned the tax change would erode the agricultural workforce and damage regional communities.

In a statement outlining the campaign’s intentions, the NFF said it agreed backpackers who make an average $15,000 during their stay in Australia, should pay tax.

But the peak farming body said an effective tax rate of 19pc - achieved through deactivation of the tax-free threshold - would be fairer for both backpackers and the industries which rely upon them, like agriculture.

Mr Morrison said the government believed foreign workers should pay their fair share of tax in Australia. 

He said being a working holiday maker does not mean you get a tax holiday.

“If you work here you should pay your tax here,” he said.

“The 2015-16 budget working holiday maker changes are an initiative aimed at strengthening the tax system to ensure that it is fair and sustainable for Australians.

“Most working holiday makers do not pay a single dollar of tax in Australia, despite using our services, such as health and emergency facilities, and earning an income here.”

Mr Morrison said the main purpose of the visa program was to foster cultural exchange by allowing eligible participants to visit Australia for an extended holiday.

He said any work undertaken during that extended visit was expected to be secondary to this broader purpose.

Mr Morrison said there are other programs and visas that are more appropriate for people who primarily want to work in Australia.

He said the Coalition government had already announced changes to encourage working holiday maker visa holders to secure work in northern Australia.

“Those who secure work in certain high demand industries in northern Australia can now remain with their employer for up to 12 months,” he said.

“In addition, further changes will follow this year to allow Work and Holiday (Subclass 462) visa holders to extend their stay in Australia by a further 12 months if they work for at least three months in agriculture or tourism in northern Australia.”

In launching the online campaign and petition, But NFF Workforce Productivity Committee Charlie Armstrong said backpackers were critical to ensuring an adequate workforce was available to primary producers, particularly at busy times of the year.

“The agriculture industry relies on backpackers to fill severe labour shortages which are often seasonal and temporary, for example, when crops are being harvested or milk production is at its peak,” he said.

“Each year, backpackers contribute around $3.5 billion to the Australian economy and around 40,000 find employment on Australian farms.

“Taxing backpackers at a rate of 32.5pc will make work in Australian agriculture a highly unprofitable proposition.”

Mr Armstrong said the higher tax rate would lead to reduced agricultural productivity and strip regional communities and businesses of much needed tourism spending.

In response to the Treasurer’s comments today, Mr Armstrong said it was an unsurprising first position for the government to take.

But he said he believed farm groups had strong arguments on the issue to ensure fair consideration was given to lowering the tax level and not having it at “ridiculous levels”.

Shadow Agriculture Minister Joel Fitzgibbon said the “revolt” the federal government now faced was of its own making as they failed to consult the farm sector on the proposed tax change or conduct modelling on economic and social impacts of losing agricultural workers.

Mr Fitzgibbon said development of the Agricultural Competitiveness White Paper over two years provided an opportunity for the Coalition government to conduct that modelling but it failed.

He also said Mr Joyce’s assertion that the tax change provided a “strategic advantage” for Australian workers was “ignorant” because the agricultural, jobs taken up by holiday workers, weren’t filled by locals.

“Barnaby Joyce is always quick to the microphone but he’s missing in action on this one,” he said.

In a radio interview shortly after last year’s federal budget was handed down, Mr Joyce said backpackers came to Australia “because we still have a great wage rate”.

But he said Australians must work a full year to get the tax-free threshold and “It does seem a little bit incongruous that someone can work three months, four months, five months and get the tax-free threshold”.

Mr Armstrong said farmers weren’t using backpackers as “cheap labour” because they were paid at the same rates as Australian workers.

He said but local workers didn’t generally perform the same jobs as backpackers so effectively are not competing against each other.

“It’s a necessary labour source for us,” he said.

Mr Armstrong said “enormous losses” were anticipated for agriculture if backpackers weren’t performing tasks like fruit picking or operating dairies but an estimated figure had not been calculated, by the NFF.

But he said backpackers generate an estimated $3.5 billion for the national economy and risking them electing to travel to other countries due to the new tax regime, to make $200m in savings, was “weird economics”.

Taxing working holiday makers at 19pc as proposed by the NFF would generate $315.7 million, compared to the government’s estimated $540m over the forward estimates at the new 32.5pc rate.

Mr Armstrong said the NFF would now collect signatures on its petition demanding the government not press ahead on its backpacker tax and present it to parliament - potentially in late March ahead of the federal budget - and continue lobbying individual politicians.