Australia Drops Backpacker Tax

September 27, 2016 Taxation in Australia

Tax on backpackersCANBERRA – Backpackers in Australia will be breathing a sigh of relief, as the government back down from its plan to levy a raised tax rate for foreign workers.

On September 27th the government of Australia backed down on its intentions to apply an income tax rate of 32.5 percent on the incomes earned by working holiday makers.

Australian citizens enjoy a zero rate of tax on personal incomes up to AUD 18 200, followed by a rate of 19 percent on incomes between AUD 18 201 and 37 000, with a rate of 32.5 on all further income.

The government had previously stated that it would drop the thresholds for any non-residents with working visas in Australia, instead levying incomes at the full rate of 32.5 percent.

The intention quickly proved to be controversial, with many groups and experts claiming that it would hurt employers, tourism levels, and several industries, especially agriculture.

The government has now decided that foreign workers will be taxes at a rate of 19 percent for all incomes up to AUD 80 000.

The new tax rules will apply from January 1st 2017.

The rebalanced tax rate is expected to bring in less tax revenues than the original plan, however, the government hopes to make up the shortfall by raising Passenger Movement Charge by AUD 5.