And they claim that in turn could cause major labour shortages in the Australian farm, hotel and bar industries, all of which rely heavily on working holidaymakers.
Foreign backpackers on working holidays currently enjoy the same personal tax-free allowance as Australian citizens, meaning they pay no tax on earnings up to A$18,200 (£9161). But from July 2016 they will be treated as non-residents for tax purposes – forcing them to pay a swingeing 32.5 per cent tax rate from the first dollar they earn.
It means a backpacker who currently pays no tax on annual earnings of A$10,000 (£5083) will in future be expected to cough up A$3250 (£1635) to the Australian taxman.
Even under the current rules backpackers are usually required to work at the same place for six months to qualify for their tax benefits, and treasurer Joe Hockey hopes the new levy – announced in his recent budget – will save the government A$540m. However, many of those in the backpacking industry believe it to be a short-sighted measure which will make many travellers think twice about coming to Australia – with disastrous consequences for the country’s economy.
Their anger and concern was evident in comments posted on the Backpacker Trade News website, which is also operated by TNT.
One contributor, Thomas O’Brien, claimed the move was poorly thought-out, and that the impact would be felt across the tourism industry.
“I couldn’t believe this when I heard it,” he wrote. “This is going to hit the backpacker tourism sector hard. Backpackers are going to have a lot less ready money to spend, meaning they’ll be even more price-conscious than they already are. They’ll be less likely to splurge on tours and seeing all that the country has to offer, as well as looking to save money on hostels by using more services like Airbnb or going for the cheapest accommodation they can find. This is going to hurt.”
Greg wrote: “Canada/New Zealand will be loving it….an extraordinary own goal.” Mike Gay agreed, writing: “New Zealand and Canada will be getting more tourists. New Zealand is already more backpacker friendly than New South Wales anyway. Think again and change this bad thinking.”
Chris Brougham said there was: “Nothing good or smart in this decision for tour operators or anyone in the backpacker adventure industry.” Another writer, David, warned: “When visitor numbers drop and the supply of willing workers falls there will be so many economic losers ranging from bars, farms (and) labouring companies, all the way through to tour operators and accommodation.”
Steve wrote that he had to “shake my head in disgust” at the news. “How can the government ignore how many dollars these very backpackers spend during their long-term stay in Oz and their contribution to the rural economy, providing much-needed labour? (We) should be encouraging more of them, not less!”
Another anxious contributor, Andrew, said the tax was a short-sighted attempt to raise revenue from a non-voting group. “Isn’t the name in the visa?” he wrote. “A working holiday visa – not a working, get over-charged and taxed so you cannot enjoy your holiday visa, and leave with a bitter taste in your mouth visa.”
Asked for his thoughts, Glen Mintrim, UK managing director of STA Travel, told TNT: “We are disappointed by the proposed changes for our customers as they would have a negative impact on the backpacker sector. It would be a big blow to young people seeking employment from the UK, and, in turn, have a knock-on effect to communities and businesses in Australia who rely on these workers.
“We find that a lot of young UK workers in Australia spend their tax-free element whilst travelling in Australia, and I fear this will encourage an exit to places like Thailand, which provide a low-cost option.
“Young people want to see the world and explore. I do not think these changes will stop them. However, it might impact how long they stay in Australia for. Many of our customers use their working holiday as a means to travel in Australia and do not stay put for six months in one job; these customers shouldn’t be put off by these changes.”
