Moves are underway within the Coalition to find a compromise for the controversial 32.5 per cent backpacker tax, slated to take effect in July.

The agriculture industry is worried the tax will cause a labour shortfall and stifle the growth of the nation’s $10 billion horticulture sector.

Some rural MPs are questioning whether the proposed tax will generate the full $540 million forecast by Treasury over the next three years.

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The change will see foreigners on working holiday visas taxed 32.5 cents from the first dollar they earn, and a scrapping of the $18,200 tax-free threshold.

“It is the harvest-dependent international backpacker scene that we want to see continue and not suddenly disappear,” Liberal Member for Murray Sharman Stone said.

Dr Stone, who also chairs the Coalition’s Agriculture Policy Committee, said the tax could generate less income than expected if future working holiday-makers were deterred by the prospect of lower wages.

Farmer Jeff McMahon says he will lose critical staff if the ‘backpacker tax’ in implemented on July. Photo: ABC

“We’ve looked at what the tax take might be as a contribution to the budget, but if we have fewer backpackers arriving that tax take is a lot less when calculated,” she said.

“We have been encouraged by the [Agriculture] Minister to look at a package which might make it less a case of the backpacker seeing a third or so of their salary going.”

One option being discussed, according to Dr Stone, is changes to superannuation arrangements for backpackers.

Currently working holiday makers have to pay superannuation, but can get some of it back when they leave the country.

“We also take superannuation off their pay checks which is a lot of red tape, a lot of bureaucracy, and the employer has to contribute to that,” Ms Stone said.

“We are hard at it thinking of how to get around the unintended consequences of the tax take for this category of worker because when it comes to horticulture, our abattoirs our piggeries, our dairy industry, quite frankly we couldn’t do without this international labour coming in.”

Farmers concerned tax could scare off backpackers

Jeff McMahon, who farms at Stanthorpe in south-east Queensland, is convinced the tax will scare off backpackers and could end up costing the Government more money in the long term.

“It is like shooting the goose that lays the golden egg,” he said.

“You can’t tax people unless they come to the country, and then if you’ve got less backpackers we’re going to suffer economically, and then there’s less revenue for the Government.”

The National Farmers Federation (NFF) is lobbying the Government for a compromise tax rate of 19 per cent, arguing that taxing backpackers 32.5 cents on every dollar will jeopardise Australia’s rapidly expanding horticulture industry.

“Horticulture is worth around $10 billion to the Australian economy, it is growing very fast and by 2030 horticulture will be worth $30 billion,” NFF chief executive Simon Talbot said.

“But not having backpackers and available labour will stifle and bottleneck the growth of horticulture.”

‘If they don’t come to Australia, then fruit will rot’

Mr Talbot said Australia would also risk losing its foreign labour to Canada and New Zealand.

Member for Murray Sharman Stone said her electorate depended on backpacker labour. Photo: ABC

“If they don’t come to Australia, then fruit will rot on the vine,” he said.

Agriculture Minister Barnaby Joyce told the ABC he has acknowledged the industry’s concerns, and would monitor the impact of the tax when it took effect.

“If it became quite clear and apparent after the tax came in that there were major changes, then of course we are willing to consult and consider what we will do then,” he said.

The Government has moved to address some of the concerns, announcing an expansion of the Seasonal Worker Program which sees Pacific Islanders employed on Australian farms.

The program attracts about 8000 workers a year, which makes it much smaller than the 417 working holiday program.

However, the NFF is sceptical the seasonal worker scheme alone will provide enough timely labour for fruit and vegetable farmers.

Backpackers threaten to look abroad for work

Backpackers working on fruit farms near Stanthorpe in south-east Queensland are threatening to take their skills abroad if the tax is implemented.

Backpacker Liv Pearla from Denmark picking apples on Queensland’s Granite Belt. Photo: ABC

Liv Pearla from Denmark, who picks about one tonne of apples per day and currently earns about $800 per week, said she was now rethinking her travel plans.

“I was supposed to apply for my second-year visa but now I’m considering travelling further when this expires in November,” she said.

Sam Bassett from Wales said his friends back home were already reconsidering their work holidays to Australia.

“I’ve got friends back home that wanted to come here but they are now looking at alternative options like New Zealand or Canada, who don’t have such a high tax rate,” he said.

Mr Bassett said if the tax was implemented his wages in Australia would be similar to those in the UK.

In a statement, Federal Treasurer Scott Morrison said backpackers had an obligation to pay tax in Australia.

“Working holiday-makers do not pay a single dollar of tax in Australia, despite using our services, such as health and emergency facilities, and earning an income here,” he said.

“Being a working holiday-maker does not mean you get a tax holiday. If you work here you should pay your tax here.”

– ABC