After a delay of 16 months, the Federal Government has resolved the political issue of the Backpacker Tax.

Working holiday making visa holders, or backpackers, are a key source of seasonal labour in Australia – backpackers comprise up to 25 per cent of the farm workforce each year.

Since the Labor government raised the tax threshold some years ago most backpackers have paid no income tax in Australia.

But in the wake of a ruling by the tax commission that backpackers should not be eligible for the tax-free threshold, the Abbott government announced a 32.5 per cent tax on backpackers in its 2015-16 budget which was expected to raise AUD $500 million each year.

The plan received a chorus of protest from employers in the agriculture, horticulture, tourism and hospitality sectors who depend on backpacker labour.

Yesterday, the Federal Treasurer announced that from 1 January 2017, backpackers will pay 19 per cent on earnings up to AUD $37,000 and at ordinary marginal rates above that amount.

The government is also providing AUD $10 million to Tourism Australia to support a global youth-targeted advertising campaign to promote Australia to potential backpackers.

The government has also reduced by AUD $50 the cost of working holiday maker visas (subclass 417 and 462) and increased the passenger departure tax by AUD $5 to AUD $60.

Its decision to increase the passenger departure tax was yesterday labelled as a “blatant cash grab” by the Tourism & Transport Forum Australia.

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