21 Mar 2016

Australia backpacker tax might drive workers to NZ

8:06 pm on 21 March 2016

The Australian horticulture industry is worried that a new backpacker tax will drive most of their seasonal workers to New Zealand.

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A group of young backpackers in Auckland (file) Photo: RNZ/ Tom Furley

The change will mean foreigners on working holiday visas will be taxed 32.5 Australian cents from the first dollar they earn, which is almost double New Zealand's tax rate.

The Australian government wants to introduce the tax rise from 1 July and also scrap the $A18,200 tax-free threshold.

Australia's Tourism Minister, Senator Richard Colbeck, said he would review the tax after concerns were raised about the impact on the country's global competitiveness as a backpacker destination.

Growcom, which represents horticulture in Queensland, said growers were reporting that the majority of backpackers hadn't asked them to sign off on their second-year visa extensions.

Its chief advocate, Rachel Mackenzie, said the change would hit backpackers in the pocket.

"Their earnings will effectively drop from $21.62 an hour to $14.59, which is less than they'd get paid in New Zealand and Canada.

"Countries like New Zealand and Canada will look like more attractive destinations, if you earn more money for doing the same work in New Zealand where the cost of living is less - then New Zealand will automatically become more attractive."

General conversations among backpackers were that their friends back home no longer wanted to work in Australia, that it was too hard work to have to pay more tax, and that they were cancelling plans to stay another year.

"A lot of the areas are pretty remote and the only reason backpackers go there is to work, therefore those communities won't get those dollars through their community and that's a pretty significant issue."

However, Horticulture New Zealand chief executive Mike Chapman said he didn't think the higher tax in Australia would draw people over here.

"I don't think [the] backpacker tax will have any effect on backpackers coming to New Zealand at all. In Australia, it may mean that backpackers don't look for work, I'm not sure.

"Backpackers pay the same amount of tax as every other New Zealander and I think that's appropriate, and of course if you don't work a full year, you get a refund and that's appropriate as well."

He would be opposed to any similar tax being introduced in New Zealand.

"It's unnecessary, it would raise very little money and it would just cause bad feelings."

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