Backpacker labour force set to contract

Backpacker tax scares off vital labour force

Agribusiness
BACKPACKER TAX: Agriculture's vital seasonal labour force is set to contract over the next five years as an ongoing result of the controversial tax.

BACKPACKER TAX: Agriculture's vital seasonal labour force is set to contract over the next five years as an ongoing result of the controversial tax.

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Agriculture's vital seasonal labour force is set to contract over the next five years as an ongoing result of the controversial backpacker tax.

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THE number of working holiday visa holders is expected to decrease over the next five years as an ongoing result of the controversial backpacker tax bill, passed in late 2016.

That’s the finding of research company IBISWorld which suggests the tax will particularly imact on agriculture, where backpackers are used to supplement their labour requirements, and hostels that predominately house backpackers. 

As of January 1 workers under working holiday visas are classed as non-residents for tax purposes. Backpackers working in Australia are subject to a 15 per cent tax on income earned up to $37,000, with foreign resident tax rates applying from $37,001. In addition, working holiday visa holders’ superannuation funds are to be taxed at 65pc from July 1, up from the current 38pc.

IBISWorld senior industry analyst Nathan Cloutman said in January 2013, a price rise for the working holiday visa discouraged many overseas travellers from working in Australia through the working holiday visa.

“Backpacker numbers have increased over the past five years, but the average length of stay has decreased,” Mr Cloutman said.

“Many backpackers are now only visiting Australia for a brief period and working in other countries, particularly New Zealand, South Africa and Canada.

“A tax on all income earned on working holiday visas will likely discourage backpackers looking to work during their stay in Australia, causing average backpacker visitor nights to decline over the next five years.”

He said it was anticipated that avoidance schemes and cash jobs would become more prevalent under the new rules.

“Overseas backpackers are the primary users of hostels in both urban and rural areas,” Mr Cloutman said.

“As a result, the decline in backpacker visitor nights is expected to hurt demand for hostel operators, particularly those located in rural areas that rely on backpackers working in agricultural industries.

“The bill is likely to affect several agricultural industries over the next five years. Many fruit and vegetable growing farms rely on cheap labour sourced from overseas backpackers, particularly as many backpackers work on agricultural farms to stay in Australia for an additional year.

“This pressure may cause farmers to reduce production, which could lead to profitability declines. Many farms will likely find it hard to fill job vacancies without a cheap and casual visiting workforce.”

The story Backpacker labour force set to contract first appeared on Queensland Country Life.

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