Australia’s backpacker tax delayed six months

Peter Terlato 17 May 2016

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Working holidaymakers won’t be hit with higher taxes just yet.

The Coalition government’s backpacker tax, announced in the 2015-16 Federal Budget, has been delayed until next year.

The changes, now effective 1 January 2017, will see working holidaymakers taxed at a rate of 32.5% on all earnings from 1 July this year.

Currently, international travellers working in Australia are only taxed when their income exceeds the $18,200 tax threshold. They are then taxed at a rate of 19c on the dollar, up to $37,000.

The majority of individuals affected by the proposed change would be travellers involved in Australia’s “Working Holiday Maker Program”. These are travellers, aged between 18 and 30, intending to work in Australia while on an extended holiday.

Working holidaymakers are also subject to a higher tax rate than residents when they withdraw their accumulated superannuation. The tax rate is between 38% and 47% for non-residents, while residents are charged 20%.

A higher tax rate may cause backpackers to seek work in other countries, such as New Zealand or Canada.

In New Zealand, working holidaymakers are taxed at a rate of 10.5% on the dollar, up to $14,000, and 17.5% on earnings between $14,001 and $48,000.

Assistant Treasurer Kelly O'Dwyer has also called for a government review of working holiday visas to assess the agricultural sector more broadly.

The outcomes of the review will be considered by Cabinet in October or November this year.

Picture: urosr / Shutterstock.com

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