On Tuesday, the Australian government announced that it would move ahead with a controversial new “backpacker tax” on visitors who take seasonal work.
Until now, tourists with Working Holiday Visas (WHVs) were treated like Australian residents under the tax code, meaning that the first AU$18,200 they earned was tax-free. As a result, many of the 600,000 people who backpack through the country each year opt to supplement their travel budgets by working on Australia’s farms.
The agricultural sector loves the influx of backpacker labor, which helps make up for a shortage of rural workers during the busy season. The arrangement has also allowed the country to market itself as more backpacker-friendly than other Commonwealth countries; New Zealand, Canada, and the U.K., for example, have long been in the business of shaking down travelers by requiring them to pay income taxes.
In May of last year Australia’s government revealed its plan to levy a 32.5 percent tax on every dollar earned by WHV holders.
Right away, the farm and tourism industries lodged loud protests. In February 2016 the National Farmers Federation launched a petition opposing the tax, which attracted over 10,000 signatures in two weeks. Australia’s Tourism and Transportation Forum (TTF) also weighed in, with CEO Mary Osmond calling the backpacker tax a “blatant cash grab.”
Backpackers themselves have responded in their own way: by steering clear of Australia. In the 12-month period following the announcement of the tax, the number of people who traveled to the country on WHMs declined by approximately 12,000 compared to the previous year.
There were high hopes that the government might back off. In May 2016, the Treasury announced that the implementation of the tax would be delayed until January 2017. This week word came that the rate would be lowered to 19 percent.
This has mollified some opponents of the measure, but resentment remains. “It is an outrageous situation that the Federal Government continues to view the tourism industry as a cash cow,” Osmond said. She added that her organization would continue the fight.
Backpackers meanwhile might look to New Zealand, which offers a number of beautiful tourist destinations, along with a now–comparatively low tax on backpackers of 10.5 percent.