COALITION government members are exploring options to soften changes to the backpacker tax regime and avoid inflicting losses to critical farm labour supplies.
Last week farming groups launched a new public campaign ahead of the tax on working holiday-makers altering on July 1 this year, to a flat rate of 32.5 per cent.
Under current working holiday visa conditions, backpackers receive a tax-free threshold of $18,200 then pay 19pc up to $37,000 and 32.5pc up to $80,000.
But the National Farmers Federation and horticulture groups want that threshold deactivated and replaced with a 19pc rate; instead of charging backpackers 32.5pc who make an average $15,000 during their stay in Australia.
Queensland LNP Senator Matthew Canavan said he could not support a tax system which largely allowed working backpackers to pay no tax when they used public facilities like hospitals and roads.
But Senator Canavan said exempting backpackers from paying tax was an “unintended by-product” of increasing the tax-free threshold to $18,200 in 2012.
He said prior to 2012, backpackers would have paid tax and the July 1 change was about “trying to rectify an anomaly”.
“I recognise a tax rate of 32.5pc in the dollar is a big step change and I’ve been putting forward other options to deal with the issue,” he said.
“One option is to use the provisions of the 416 visa seasonal worker program to pay a 15pc rate rather than the non-resident 32.5 rate.
“But of course that’d cost the budget hundreds of millions of dollars and so we need to find that money somewhere.”
Asked whether he supported softening the tax as demanded in the NFF’s campaign to soften the backpacker tax - which includes an online petition surging towards 10,000 signatures this week - Federal Agriculture Minister Barnaby Joyce was coy.
Mr Joyce said if the backpackers don’t turn up they effectively paid no tax “because they’re not there” making any changes “purposeless”.
“We’re alive to the issue; we’re watching the issue; but what I can say right now is it’s erroneous because there has been no change made yet,” he said.
Queensland Nationals MP Keith Pitt said it was yet to be determined whether the NFF proposal would be implemented by the Coalition government but he said the 32.5pc flat rated needed to be reviewed.
“If we continue to lose the backpacker trade that’s going to hurt a lot of people in the agriculture and tourism industries,” he said.
Victorian Nationals MP Andrew Broad said the new 32pc rate was unreasonable but a 15-19pc flat rate - like the NFF was proposing, with no tax-free threshold – was fairer.
“Nobody is saying backpackers should pay no tax but when you look at the contribution they do make to the economy and agricultural work-force, we still need to retain an incentive for them to come and do the work here,” he said.
Mr Broad said he contacted former Treasurer Joe Hockey immediately after the tax change was announced in last year’s federal budget to express concerns about potential impacts on farm labourers.
But the former Victorian Farmers Federation President said the NFF had been silent on the issue for 10-months and launching a new campaign last week, in the first parliamentary sitting week of an election year, “reeks of politics”.
Mr Pitt said constituents and local employers in his large rural electorate of Hinkler, particularly those engaged in horticulture, had also raised fears about the tax changes after last year’s budget which he also put to the former Treasurer and has since engaged with Mr Morrison’s office.
But he said in his personal view, the tax increase was something the government must address as it may damage the ability for Australian workplaces to attract backpackers.
“And let’s be serious; those workplaces do have a great need for a large amount of workers over a very short period of time which does suit the 416 and 417 (visa) model,” he said.
“In saying that, for all of those Australians out there looking for jobs, I’d suggest moving to a regional area when the season is on and work is available and it does pay.
“But we do need to ensure our growers who are in a growth phase through free trade agreements and other initiatives to increase their ability to export overseas and make more money, can take their crop off over a short period of time.
“Sometimes they may need 200-300 workers for three days but if their crop stays in the field, nobody makes any money.”
Assistant Agriculture and Water Resources Minister Anne Ruston said the NFF proposal deserved some consideration but she wasn’t in a position to say exactly where the tax should land.
“No doubt everybody needs to contribute to the infrastructure and services they use in Australia but whether the current proposal is the right place to land I’ll reserve my judgement until I’ve seen more of the facts and details,” she said.
Senator Ruston said more information was needed on the actual causes for any reduction in backpacker numbers, coming to Australia.
“I think there could be a number of factors that are impacting the drop in backpacker numbers and at the moment I’ve asked the Department to look at what those potential impacts might be,” she said.
“And then when we’ve got all of the facts we can work out what needs to be done.
“But firstly I’d say that I recognise that the backpacker workforce is a really important workforce for regional and rural Australia especially horticulture.
“There are some strong concerns out there so I’ll be making sure I get across this issue and take it seriously.”
The Voice of Horticulture has said the tax changes pose a threat to grower profitability and should be reversed with the current award conditions preserved.
The group says the “backpacker tax” changes are likely to have a significant impact on the horticulture industry which employs many 417 and 462 visa-holders to help harvest their crops.
Chair Tania Chapman said Australia was already at a major cost disadvantage compared to other food producing countries in terms of the cost of labour for semi-skilled and un-skilled horticultural work.
“We need to be able to continue to attract temporary workers if we are to capitalise on the increasing export opportunities for Australian horticulture products in Asia,” she said.
Last week, Federal Treasurer Scott Morrison responded to the NFF’s demands saying the government believed foreign workers should pay their fair share of tax in Australia and being a working holiday maker does not mean you get a tax holiday.
“If you work here you should pay your tax here,” he said.
“The 2015-16 budget working holiday maker changes are an initiative aimed at strengthening the tax system to ensure that it is fair and sustainable for Australians.
“Most working holiday makers do not pay a single dollar of tax in Australia, despite using our services, such as health and emergency facilities, and earning an income here.”
NFF Workforce Productivity Committee Charlie Armstrong said taxing backpackers at a rate of 32.5pc would make work in Australian agriculture “a highly unprofitable proposition”.
Mr Armstrong said the higher tax rate would lead to reduced agricultural productivity and strip regional communities and businesses of much needed tourism spending.
