Budgeting, Travel Planning

What Is The Backpacker Tax? (and how it will impact you)

22 Jun , 2016  

You are in the right place to learn a bit more about the backpacker tax and how it could have a huge impact on Backpacking Australia going forward. Worth around £91 million a year, the tax is set to take 32.5 cent of every Aussie dollar you earn – but not just yet.

With 214,830 working holiday visas granted in 2014-15, Australia’s working tourism sector has boomed year on year as more backpackers head to the outback in search of well paid (labour intensive) work. The majority of those visas are to Brits, most likely heading over for a bit of fruit picking. No doubt soon to be followed by some surfing, BBQ’s and beach parties. So what is the backpacker tax and how is it going to impact your trip to Aus? Let’s take a look.

Paying Their Way - Backpacker Tax

Paying Their Way – Photo By: Stephan Ridgway

Backpacker Tax Overview

As the name suggests, it’s a tax. One that targets travellers and backpackers who undertake money-making activities during their working visa stay in Australia. The good news is that the tax has been delayed for now – it was due for July 2016. It will now be reviewed in October instead. Even if the delay is politically driven, it benefits backpackers who are currently on their working holiday visas. Allowing them to continue to pay nothing on the first ¢9,800 they earn.

Why The Delay?

The tax was very much a surprise inclusion in the most recent budget and has faced strong opposition from rural communities and the farming sector who rely heavily on backpackers in order to fill their on-farm roles during peak times. A combination of these protests along with the timing of the election has led to the delay. If you would like to support the rural and backpacker communities, sign this petition on change.org. You never know, if you are planning a trip to Australia in the next couple of years – you could be doing yourself a favour!

When Will The Tax Come In?

While the new tax has been put off for now, it could still be implemented pretty soon. The review of the tax is due to report back in mid October and if all is tickety-boo, the new tax will commence from January 1st 2017. Not a great way for backpackers to start the year! Of course this could all change before then (let’s hope it does), as the review could suggest amendments to the rates or completely scrapping the scheme altogether. After all, let’s not forget that the backpacking community contributes around £1.78 billion into the Australian economy each year – a figure that dwarfs the benefits of the newly proposed backpacker tax.

How Much Will It Cost Me?

Had it come in this year with the originally stated rates, you’d be looking at paying $3,250 for every $10,000 you earn – quite a whack, especially to someone living on an tight budget anyway. This is where the delay could mean good news for future visitors to Australia, as it allows lobbyists more time to take their protests to government – likely seeking a reduced tax rate. This will probably be more like the countries lower tax brackets, which currently sit at around 19% – quite a difference from the originally proposed rates. This drop would make Australia much more competitive with other working holiday visa options such as New Zealand and Canada.

What Can I Do?

For now, not a great deal can be done apart from contributing to the above petition. One thing is for sure, there will be big decisions to be made going forward for the Australian government. The BBC reported that working visa applications fell by 5% after the tax was proposed – a clear sign that backpackers aren’t willing to contribute quite so much to the taxman. So let’s wait and see how this one pans out.

We’ll continue to update this post as and when new information becomes available – make sure you bookmark it to stay up to date! 

Let us know your thoughts and opinions on this looming tax as well as any ideas you have for protesting against it.

FEATURED PHOTO CREDIT: 401kcalculator.org

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By  -    
25, but still just a big kid. Travel enthusiast. Chelsea fan. Beer lover. Developer @ www.tornadocode.com

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