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Tourism body slams new ‘backpacker tax’

May 13, 2015 • Local, News,

Australian Treasurer Joe Hockey

Australian Treasurer Joe Hockey

Australia’s peak tourism body has slammed the government’s new backpacker tax as “ridiculous”.

Treasurer Joe Hockey revealed the new slug on working holiday visa holders in his Budget speech on Tuesday evening.

It will mean that those on working holiday visas will be taxed at 32.5% on all their income, from the first dollar earned.

A backpacker earning $40,000 per year over two years in Australia will be more than $16,000 worse off because of the changes.

“Currently, a working holiday maker can be treated as a resident for tax purposes if they satisfy the tax residency rules, typically that they are in Australia for more than six months,” the Budget papers said.

Traveler with a bag at the speedwalk

Working holiday makers are among Australia’s highest spending visitors.

“This means they are able to access resident tax treatment, including the tax‑free threshold, the low income tax offset (LITO) and the lower tax rate of 19 per cent for income above the tax free threshold up to $37,000.”

Under the current rules, backpackers usually get a tax refund from their earnings, money that often goes on extending their Australian adventure.

These refunds will essentially disappear under the new rules which kick in from July 1, 2016.

The new measure is expected to generate half a billion dollars in new revenue over three years.

The Australian Tourism and Transport Forum (TTF) has slammed the plan – and new visa application price hikes – as a tax hit on tourism. It’s Chief Executive Office has also suggested that the tax hike will make young visitors think twice about coming to Australia.

“Working holiday makers, one of our highest spending categories of visitor, will no longer be treated as residents for tax purposes, removing their eligibility for the tax-free threshold and forcing them to pay tax from the first dollar they earn. This measure will rake in more than $540 million over four years – more than the government’s new ‘Google tax’,” the TTF said in a statement.

“Ripping more than half a billion dollars from the visitor economy with a new ‘backpacker tax’ is simply ridiculous,” said Chief Executive Officer, Margy Osmond.

Margy Osmond, CEO of the Australian Tourism and Transport Forum.

Margy Osmond, CEO of the Australian Tourism and Transport Forum.

“Taxing working holiday makers from the first dollar they earn, instead of giving them equal treatment with other resident taxpayers, is a backward step and will damage Australia’s international reputation.

“Australia has long been a favourite destination for young people from around the world who live, work and travel here for up to two years, and who spend on average more than $13,000 during their stay. Coupled with the tenth consecutive increase in their application fees, this new tax on working holiday makers will make them think twice about coming here.

“Increasing visitor visa application charges is sending Australia in the wrong direction. With fierce global competition for the visitor dollar, jacking up the cost of visa applications is an enormous own goal.”

 

 

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