Simply A Bad Tax Idea !

It is generally conceded that Joe Hockey's 2015 budget was not his finest hour.   One of the concepts  awaiting implementation is a proposal to change the way foreign workers are taxed when backpackers provide the essential labour to bring in Australia's fruit crop and harvest the vast agricultural enterprises that keep the fruit and vegetable markets fully stocked.

The present tax regimen allows an $18,200 tax free threshold for each worker before the ordinary tax scale cuts in.   Unlike most of the working public, backpackers are constantly on the move following the crop ripening cycle and most alternate this means of sustenance with their holiday regimen of seeing the country as tourists.

The proposal seeks to abandon that tax free threshold and apply a tax of 32.5 cents in the dollar on the first dollars those backpackers earn.   There is consternation in backpacker circles and a fear in fruit and vegetable growing areas that foreign backpackers will abandon Australia and instead bestow their patronage on another foreign country.

Few of the public realise that this backpacker stream is essential to bringing in the harvest in Australia - and without it a major portion of the crop will rot on the trees and the vegetable supply will be seriously truncated.  This is hard work in the hot sun and youthful backpackers cheerfully accept it as a means of financing their holiday in Australia.   It is work that many Australians reject and at the same time as there are labour shortages in bringing in the crops, there are also many people drawing unemployment benefits in fruit growing areas.

This uncertainty is having an effect on farming schedules.  There are reports that Queensland lettuce growers have reduced plantings because they fear they will not be able to attract sufficient workers to process the crop.  Summer is fast approaching and it is essential that the tax regimen that will apply to backpackers be settled quickly.   Decisions on coming to Australia - or to another country - are being made now and obviously a punitive tax to lower earnings is a topic being discussed in backpacker circles.  Uncertainty will not work in our favour.

There is speculation that a different approach is under consideration.  Because backpackers are an essential service to this country it is envisaged that they be able to apply for a special visa describing them as temporary farm workers.  There seems reluctance to continue to grant that $18,200 tax free threshold, but there seems to be support for a lower tax of somewhere between 15c and 19 c in the dollar to apply.

The fate of the Australian fruit harvest depends on how this is received in backpacker circles. If the tax regimen is judged heavy and unfair by the journalists who cater to backpacker opinion we may  see a sharp cutback in numbers this summer and a consequent rejection of this country as a welcoming host.

It is essential that the Treasurer get the tax mix right.   Hopefully, the people who know what is happening in backpacker circles are whispering in his ear - and the farm lobby is accurately predicting the numbers needed to harvest the crop.

Once a country loses favour as a destination, it usually takes both time and a lot of money to restore that situation !