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Backpacker tax: where to next?

The Federal Election is almost behind us and we now have a new Turnbull Ministry, so what next for the backpacker tax?

In the early stages of the election campaign, the Coalition promised a wide ranging review of the tax, looking both at the rate of taxation but also the broader workforce needs of the agriculture and tourism sectors. The review is scheduled to commence shortly, with the Government committed to implementing any outcome by 1 January 2017.
 
That leaves a very tight timeframe in which to come up with an alternative plan that industry can work with - which will need to be agreed by October at the latest if it is to find its way through the various departmental approval processes and be signed off by Cabinet in time. Adding to the complexity is the uncertainty around whether legislative change would be required - and how this will fare in the new Senate.  
 
The backpacker tax campaign has successfully highlighted concern across the country about the prospect of dramatically reduced workforce numbers if the tax goes ahead. Already we have had one review - a brief but positive process led by former Tourism Minister Richard Colbeck, who now looks likely to lose his Senate seat. The agriculture and tourism sectors worked closely together during this review, and with shared interests, were able to reach a consensus position which was presented to government.

While the backpacker tax campaign appears to have got the Government's attention, the solution remains elusive
Sarah McKinnon, National Farmers' Federation

Ultimately, that process was doomed to fail - it never had the support of key Ministers and came with the condition that any outcome would need to be "revenue neutral"; in other words, "show me the money" or no change will follow. And while "Review Mark 2" has not yet commenced, the signs are again pointing to a similar approach.
 
On the positive side, there is increasing support within the Coalition for change. Michelle Landry MP, who won her seat on a knife edge, has promised to lead a renewed push to scrap the tax, while Matt Canavan, the new Minister for Resources and Northern Australia, has said the proposed 32.5% tax is too high. A number of key independents have openly opposed the tax and the Productivity Commission recommends a closer look at superannuation for overseas workers in the backpacker tax review. The alternative figure of 19% comes up regularly and may still be in play - that is, as long as the budget hole this creates can somehow be replenished.
 
And there's the rub. While the backpacker tax campaign appears to have got the Government's attention, the solution remains elusive. Farmers and tourist operators across the country know just how much fewer visitors to rural Australia will cost the Australian economy, but this doesn't count on the budget bottom line. And only the Government is well placed to try and find the money elsewhere.
 
Amidst the uncertainty, a few things are for sure: what won't work is an outcome that carves a new hole in the agriculture budget, or that allows the looming agricultural workforce shortfall to linger. Long term policy for smarter workforce design is important, but not at the cost of this year's harvest.

This article was authored by Sarah McKinnon. Sarah is the General Manager, Workplace Relations and Legal Affairs and the National Farmers' Federation.

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