Article updated: 17th May 2016
Backpacker Tax – What you need to know
UPDATE: The proposed backpacker tax changes are currently on hold pending a government review.
The Australian Government has announced that they are willing to “re think” the changes to the amount of tax working holiday visa visitors pay.
The farming industry announced their concern that the removal of the tax free threshold for backpackers would have a negative affect not only on the travel and tourism industry but also rural industries, which rely on the seasonal workforce of backpackers.
Currently, working holiday makers are eligible for the same tax-free threshold as Australian workers, and they can earn up to $18,200 without paying tax.
But that is set to change on July 1 when they will be taxed from the first dollar they earn.
The tax burden of a working holiday maker.
“Clearly taxing backpackers from the first dollar they earn – as proposed under the new changes from July 1st 2016 – will have an impact on the overall tax burden of a working holiday maker in Australia. It is good to see that the government are looking in more detail at this strategy – after all Australia is just one of a number of countries which offer a working holiday scheme – it would therefore be nice to see the same entitlement right across all countries. Backpackers bring a great deal to Australia – both the economy (namely farming, leisure and tourism) and culture.
With or without the change however, I would add that many backpackers still overlook reclaiming their superannuation on departure. Around 70% in fact still do not claim this and the average refund is around $3,500 – therefore even with the change – if most working holiday makers actually invested 10 minutes to claim this, they could somewhat offset their position (the average backpacker tax return reclaim is $2,500).”
The thought’s of Mark O’Hanrahan, tax expert and co-founder of Pink Cow tax services.
We want to know what you think!
Send us your feedback.
- Growcom CEO Pat Hannan says the horticulture industry has the most to lose when the Government increases tax on backpacker labour
Here’s some of your feedback
Here’s just a few examples of the feedback you have received so far…
I am currently in Australia doing my 88 days to get my 2nd year, having read up about this I’m now considering just leaving and going to Asia after my 1st year is up and not coming back to do a 2nd year at all. It is already hard to get a decent job as a backpacker as many companies don’t hire due to restrictions. I feel it would be too difficult to find my travels in my 2nd year so may not bother.
you get taxed at home in your job so think of it that way. Backpacking is all about doing it cheap and budgeting. It’s part of the fun.
I’m shocked they are even considering changing this. It’s already bad that non residents are taxed 30%
If I were to be taxed at 32.5% on a minimum wage job (because let’s face it most people are working jobs Aussie s won’t do) I’d be living beneath the classified ‘poverty’ line. Considering the rules for Aussie s going the other way it’s a joke. Add in farm work expectations where backpackers have a story of exploitation from every corner it makes Australia less attractive!!
We love the country, we love working here, we are being targeted as easy money. I live in regional victoria, I shop locally, I put my money back into the economy why am I being persecuted for wanting to explore?
It’s meant to experience based journey but it will prevent future travel.
It’s unfair to tax travellers more than Aussies!
If the tax was increased I wouldn’t work in Australia, I would just come here for a holiday.
Its so ridiculous for 32.5% tax.
Its all too easy for the Bar-b-Que talk to descend into “Why should they get the tax free threshold , they are on holidays with pounds & pounds in their pockets”.
Well those pounds are going head toward Canada and other locations where the the cost of backpacking, working and ultimately settling is much cheaper.
The Guardian reported yesterday that 24.7% of all UK expatriates (Source: United Nations) are in Australia and that the USA amounts for 14% and Canada 13% of those from the UK living abroad.
Needless to say that a majority of the UK entrants to Australia start off as Working Holiday visa holders.
So our our bar-b-que combatants will see less of those pounds as they will be heading to Whistler or the Grand Canyon.
How much of this money gets put back into Australia? Most people I know spend their tax on their travels around this country… seems like a silly move to do to your tourism industry.
Young people have no money to finance they journey in Australia. It’s the beginning of being independently discover the world and work for living.
I would go to Canada or Asia. It’s not fair to charge someone from the first dollar they earn and will put people off. They back back into the economy by being there so why punish them.
My working holiday visa expires in june and I’ve done my days but wont be staying for a consecutive year due to the tax changes!
I would most likely go to Asia or South America instead. I could also come to Australia on a tourist visa and then I wouldn’t work anyway.
the cost of living is already very high and many of the farmworkers jobs are at a very low wage so a high tax rate would make travelling more difficult
Staying in Europe where the cost of living is much lower or travelling through asia which is also much cheaper would be an option.
Whilst the government are reconsidering this, perhaps they could also reconsider their decision on removing voluntary work done through the wwoof organisation for the 88days for 2nd WHV eligibility.
I would think of going to New Zealand or Canada first. It is a big draw to get some tax back because you can then use this money to help fund further trips around Australia, so the money is going back in the economy anyway!
I am MD of a German tour operator specializing in youth travel and market leader in this field.
We have seen a steep decline in bookings for Australia over the past 2 years, while New Zealand grew slightly and Canada saw a big increase.
One reason certainly is the very high fee for the visa (triple the cost of a NZ Visa!) and the news in the social media that Australia is not such a backpacker friendly country anymore.
Changing now the tax system for this group will certainly not help! You will have to make up your mind and consider what brings more for the Australian economy. I am quite sure you know the answer!
Why are backpackers any different to citizens? You are still spending your hard earned cash from home and the money you earn whilst here back into the country. What is the reasoning to target backpackers other than to claw back some dosh. If there is an influx or strain with the amount being let in, tighten your immigration laws and make a visa harder to get!
I think this will only have a negative effect on the farming industry.
It’s unfair to tax travellers more than Aussies!
I am currently in Australia, however the changes will have such a significant impact on my income that I will not be staying after July.
The work available to us on farms is physically very demanding, long hours and accommodation in a working hostel is expensive. It will no longer be a viable option. We all contribute to the economy whilst here. I intend to continue travelling but just not in Australia.
I understand from speaking to several farmers that working holiday visa numbers are declining and this is impacting them. The tax changes will effect them still further.
Travellers positively impact your economy. Keeping tax off backpackers at the current rate of 30% is huge! We pay gst on everything, we go out and eat food, drink, take trips – we save up other currencies and spend it here.
…by imposing these changes it takes the incentive out of Australia, the destination to travel becomes less attractive
I have already decided against a second year visa in Australia and instead will be doing a WHV in New Zealand for a year.
Disappointed to see the way the British WHV holders are treated in Australia, considering the benefits and treatment they get on a similar visa in the UK!!
It will be detrimental to oz tourism as people come here to travel and rely on the fact that they can work their way around but once the tax laws are in place they will not be able to afford to travel for very long and it won’t be worth getting a job as after tax you will earn very little so most people will travel less of Australia. In addition currently people who work in Australia tend to do some rural work for a few months to save and enable them to travel more of Australia without working so the money earned is nearly always spent back in Australia and this process would be lost.
Just a crazy idea of doing this, Backpackers are integral to the subject at hand.
People come to Australia to work and save money to fund their travels. If the tax changes, we will be earning under minimum wage and not be able to afford the cost of living as well as saving so it would put people off.
This is an outrageous change in the rules to exploit young people who do vital work and don’t have a vote! Simple as that. It will damage the economy, not strenghten it!