Government backs down on “backpacker tax”

The government has announced that it has dropped its plan to introduce a 32.5 per cent tax (commonly referred to as the “backpacker tax”) on temporary working holiday makers. Instead, from 1 July 2017, working holiday makers will be taxed at 19 per cent from their first dollar earned, up to $37,000, with ordinary marginal tax rates applying after that.

To generate more accurate data and boost integrity of the scheme by preventing exploitation of working holiday makers, their employers will be required to undertake a once-off registration with the ATO. Employers who do not register will be required to withhold tax at the 32.5 per cent rate. Working holiday makers will be made aware of registered employers via the publication of a list on the ABN Lookup website.

The government proposes to increase the tax on working holiday makers’ superannuation payments when they leave Australia to 95 per cent, also effective 1 July 2017.