Federal Government compromises on backpacker tax rate

THE Federal Government has bowed to pressure over its unpopular backpacker tax, with a compromise that has a $10 million sweetener.

The Federal Government has compromised on the backpacker tax.

THE Federal Government has bowed to pressure and lowered the rate of its planned backpacker tax.

Cabinet met today to discuss the 32.5 per cent tax, replacing the tax-free threshold, agreeing instead to impose a lower tax of 19 per cent from the first dollar earned.

The Government had expected to recoup $500 million from the higher tax rate. It will now increase the passenger levy by $5 to cover the change.

Treasurer Scott Morrison announced the decision at Parliament House in Canberra this afternoon.

He also announced the tourism sector will get $10 million to market jobs to backpackers, Treasurer Scott Morrison has announced.

“We have been working through the issues,” Mr Morrison said when asked why the Government had now arrived at the measures.

Opposition Leader Bill Shorten said Labor warned the tax would lead to a defacto strike by backpackers.

“It’s been a mess from day one,” Mr Shorten said.

“It tells you everything that is wrong with the Turnbull Government.”

Australian tourism industry leaders blamed the proposed tax for a drop in backpacker numbers.

The latest International Visitor Survey by Tourism Research Australia showed a seven per cent fall in the time backpackers spent down under.

The downturn is in stark contrast to other overseas visitors who increased more than 10 per cent in the year to June 30, and racked up 5 per cent more nights in Australia.