Australia May Cancel “Backpacker Tax”

May 16, 2016 International Taxation

Australia may put the brakes on a proposal which could have resulted in a drought of foreign labor coming to the country.

Over the weekend the Prime Minister of Australia Malcolm Turnbull indicated that the proposed “backpacker tax” could be delayed or dropped entirely, following gears that the measure would see seasonal agricultural workers skip Australia in favour of New Zealand.

The “backpacker tax” is a proposal which would see holidaymakers taxed at a rate of 32.5 percent on the first dollar earned, instead of enjoying a tax-free threshold of AUD 18 200.

The tax has been a subject of controversy ever since it was first announced, especially in agricultural regions of the country, which are highly reliant on temporary labour provided by temporary holidaymakers.

It is feared that the punitive tax treatment may encourage some temporary workers to come to New Zealand instead of Australia.

The backpacker tax is expected to result in extra tax collections of approximately AUD 540 million per year.

Photo By: CraneStation