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Joe Hockey's $500 million 'backpacker tax' is up for review

Photo by Johannes Simon/Getty Images

One of the more controversial aspects of former treasurer Joe Hockey’s 2015 Budget, the so-called “backpacker tax”, which planned to tax foreigners on a working holiday visa 32.5% on every dollar they earn, is being reviewed by the federal government.

In was the third major announcement today by the Turnbull government, in what could be seen as a sign that he’s clearing the decks of problem issues in preparation for an early election.

Tourism minister Richard Colbeck plans to review the “backpacker tax”, telling the ABC he would lead a cross-departmental review seeking a “revenue neutral proposal”.

“Legitimate concerns have been raised about the impact the so called backpacker tax would have on our global competitiveness as a backpacker destination,” he said. “The backpacker workforce is vital to two of our key super growth sectors — agriculture and tourism.

Around 40,000 backpackers work in agriculture annually during peak picking seasons.

Hockey planned to raise $540 million over four years by abolishing the $18,400 tax-free threshold for working holidaymakers, but the move was widely condemned by the tourism and agriculture industries, which today welcomed the change of heart.

Carol Giuseppi, CEO of Tourism Accommodation Australia, said it was heartening to see the government listening to industry concerns.

“The government has identified the need to create 123,000 workers in the tourism and hospitality sector by 2020, and while the hotel industry is working hard to ‘grow its own’, regional and remote areas in particular will rely on being able to attract backpackers and others to fill shortages in peak seasonal periods,” she said.

Industry body AUSVEG said it hoped after such a “short-sighted policy” the review took into account the importance of backpacker labour.

CEO Richard Mulcahy said working visa numbers had been dropping over the past two years.

“The ongoing decline in backpackers visiting Australia must be arrested if the Australian vegetable industry is to remain viable,” said Mr Mulcahy.

“Any further decrease in the number of backpackers visiting Australia due to the proposed tax or other policy decisions would be a huge hit and could have a crippling impact on the Australian vegetable industry, threatening the future productivity and profitability of our growers.”

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