The working holiday is one of the best ways for travel hungry, cash-strapped tourists to enjoy and be able to afford their stay in Australia. At the same time, many industries in Australia have become so accustomed to foreign workers filling key labour positions that the industries are barely viable without these foreign workers, who often travel to regional and remote locations or take otherwise unwanted jobs.
Currently, backpackers (non-resident individuals) are able to access the tax-free threshold, the low-income tax offset and the lower tax rate of 19% for income above the tax-free threshold up to $37,000. From 1 January 2017, backpacker workers will be taxed at 19% from their first dollar earned. This rate of 19% was actually lowered from the originally proposed 32.5%, after concerns from industries that rely on backpackers.
For example, a non-resident individual earning $40,000 in the current tax year would be liable for $4,547 in personal income tax, leaving an after-tax income of $35,453. Under the proposed arrangements, this individual would be liable for $7,600 in personal income tax, leaving an after-tax income of $32,400. But realistically many of these backpackers were earning smaller sums that used to be less than the tax-free threshold and so were not taxed at all, but after this change, they will be.
Backpackers might appear to be safe targets for increasing revenue because they can't vote against increased taxes, however, they can vote based on where they choose to go for a working holiday. Also, these same backpackers are spending a considerable portion of their incoming on living expenses, effectively putting their earnings back into the local economy anyway. The effect of this tax on the choices that working tourists make and whether industries get the labour they need is yet to be seen.
N.B.: The legislation to pass this new tax has not occurred.