Airline passengers to pay more after backpacker tax retreat

AIRLINE passengers will pay more for tickets to make up for revenue lost in the government’s U-turn on a backpacker tax.

Airline passengers will pay a $5 levy to make up for the government’s backdown over the backpacker tax. Picture: Brendan Radke

AIRLINE passengers will pay more for tickets to make up for revenue lost in the government’s U-turn on a backpacker tax.

Treasurer Scott Morrison confirmed today the dumping of a Budget measure to remove the $18,000 tax-free income concession and impose a 32.5 per cent tax from the first dollar earned by visitors on working holiday visas.

Instead, from January 1 the tax will be 19 per cent up to $37,000, after which normal tax rates will apply.

However, average Aussies will have to pay for the backdown, with the government to impose a $5 levy on airline tickets from July 1 to make up for the lost revenue.

The government will increase the Passenger Movement Charge, imposed on all passengers when they fly out of Australia, from $55 to $60. This will raise about $345 million for the Budget bottom line.

The government argues Labor’s measure of allowing $18,000 in tax-free earnings for backpackers had produced rorting. But the new backpacker deal does not include any cuts in expenditure. It just covers costs.

Nationals MPs, including Deputy Prime Minister Barnaby Joyce, had opposed the backpacker tax — a feature in the May Budget and taken to the last election — arguing it would rob the agriculture industry of seasonal workers.

The decision was revealed as the tourism industry warned a backpacker boycott had started with a “massive drop” in working holiday visits.

Relenting on the measure will cost $350 million and the revenue will be made up elsewhere, mostly from the passenger levy.

And the government will claim 95 per cent of superannuation payments when a backpacker leaves the country.

Australian Treasurer Scott Morrison has approved a new plan under which working holiday-makers will be taxed 19 per cent on any earnings up to $37,000, starting from January 1. Picture: AAP Image/Lukas Coch

But the industry will get more than a relaxed tax scheme. The tourism industry will get $10 million over two years to market Australia as a working holiday destination.

The holiday visas application fee will be cut by $50 to $390, and the age limit for working holiday provisions will rise from 30 to 35 years.

Immigration Department figures showed the number of working holiday visas fell by 5.4 per cent in the 12 months to June 30, 2016, the Tourism and Transport Forum said today. This was 2229 fewer visas.

Since 2012-13, the number of working holiday makers has dropped 17 per cent from 258,248 to 214,583 in 2015-16 — down 43,665 working holiday visitors.

In a statement released before the change was announced, the forum called on the government to help “repair the damage to Australia’s international reputation”.

Mr Morrison said the fall in visits was “a consequence of factors including exchange rate variations and changed economic conditions in source countries”.

“The Turnbull Government’s package of reforms to working holiday-maker arrangements will therefore not only ensure working holiday makers pay fair tax on their earnings but also increase Australia’s attractiveness as a top destination for backpackers,” he said.

Opposition leader Bill Shorten said “the backpacker has been a mess from day one”.

He said Labor had warned of a “strike” by working holiday visitors and the government had rejected it.

“Now they are going to make every traveller pay more tax because they can’t make a backpacker tax work properly,” Mr Shorten said.