Backpackers who live, work and travel in the country are among Australia’s highest-spending visitors, and foreigners on working holidays currently pay no income tax until they earn A$20,000 – the same tax-free threshold enjoyed by residents.

But new budget proposals mean working holidaymakers will no longer be treated as residents for tax purposes – forcing them to pay tax from the first dollar they earn.

“Ripping more than half a billion dollars from the visitor economy with a new ‘backpacker tax’ is simply ridiculous,” said Margy Osman, chief executive of the Tourism and Transport Forum. “Taxing working holidaymakers 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.”

Ms Osman said increased visa application charges were also “an enormous own goal”. Visitors from China will see application fees increase from $130 to $135, while working holidaymakers face an increase from $420 to $440.

“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,” said Ms Osman. “Coupled with the tenth consecutive increase in their application fees, this new tax on working holidaymakers will make them think twice about coming here.”

However, Robert Henke, secretary of the Backpacker Operators’ Association New South Wales, said most backpackers already failed to benefit from the A$20,000 tax threshold because they tended to move around rather than working in the same place for the required six months. He told the BBC that bad publicity resulting from the budget changes could do more to scare backpackers away than the changes themselves.