COALITION government members are exploring options to soften changes to the backpacker tax regime and avoid inflicting losses to critical farm labour supplies.
Earlier this month, farming groups launched a new public campaign ahead of the tax on working holiday-makers altering on July 1 this year, to a flat rate of 32.5 per cent.
Under current working holiday visa conditions, backpackers receive a tax-free threshold of $18,200 then pay 19pc up to $37,000 and 32.5pc up to $80,000.
But the National Farmers Federation and horticulture groups want that threshold deactivated and replaced with a 19pc rate; instead of charging backpackers 32.5pc who make an average $15,000 during their stay in Australia.
Queensland LNP Senator Matthew Canavan said he could not support a tax system which largely allowed working backpackers to pay no tax when they used public facilities like hospitals and roads.
But Senator Canavan said exempting backpackers from paying tax was an “unintended by-product” of increasing the tax-free threshold to $18,200 in 2012.
He said prior to 2012, backpackers would have paid tax and the July 1 change was about “trying to rectify an anomaly”.
“I recognise a tax rate of 32.5pc in the dollar is a big step change and I’ve been putting forward other options to deal with the issue,” he said.
“One option is to use the provisions of the 416 visa seasonal worker program to pay a 15pc rate rather than the non-resident 32.5 rate.
“But of course that’d cost the budget hundreds of millions of dollars and so we need to find that money somewhere.”
The Voice of Horticulture has said the tax changes pose a threat to grower profitability and should be reversed with the current award conditions preserved.
The group says the “backpacker tax” changes are likely to have a significant impact on the horticulture industry which employs many 417 and 462 visa-holders to help harvest their crops.
Chair Tania Chapman said Australia was already at a major cost disadvantage compared to other food producing countries in terms of the cost of labour for semi-skilled and un-skilled horticultural work.
“We need to be able to continue to attract temporary workers if we are to capitalise on the increasing export opportunities for Australian horticulture products in Asia,” she said.
Queensland Nationals MP Keith Pitt said it was yet to be determined whether the NFF proposal would be implemented by the Coalition government but he said the 32.5pc flat rate needed to be reviewed.
