The federal government has announced the introduction of a controversial backpacker tax which would see working holidaymakers taxed at 32.5 percent will be delayed.

The tax's introduction has been delayed until 1 January, 2017, pending a review of the proposal.

The tax was to be effective from 1 July, but has received significant criticism from the agriculture, tourism and hospitality industries, which are heavily reliant on working holidaymakers. The sectors have argued that the tax hike would see workers  – currently taxed only on money earned above the $18,200 threshold – head to New Zealand or Canada instead of Australia.

The tax’s delay would allow the government to consider a new visa targeting backpackers who work, and would likely include some rate of tax, the ABC reports.

When the latest federal Budget suggested the tax would go ahead, Margy Osmond, Transport and Tourism Forum Australia CEO said  “The federal government’s destructive backpacker tax is going to smash the number of people choosing Australia as a backpacking destination when working holiday makers are taxed 32.5 percent on every dollar they earn on their holiday.

“Working holiday backpackers are a crucial source of labour for tourist operators in remote and regional parts of Australia. These are businesses that are heavily influenced by seasonality and locations where it is extremely difficult to find local or permanent staff.”

She said the tourism industry would be "livid" if the 32.5 percent tax rate was introduced.

"This is a very sensible first step by the government and one that is applauded by the tourism and hospitality sector across the country," said Tourism Accommodation Australia (TAA) chair, Martin Ferguson.

"Working holidaymakers are an important source of labour for the accommodation industry, filling chronic labour shortages in regional areas during seasonal periods.

"Australia competes globally for backpacker tourism and this change would have acted as a serious disincentive to working and travelling in Australia at a time when the government's own commissioned survey identified the need for 123,000 additional workers in the hospitality and tourism industry by 2020.”

Restaurant & Catering Australia (R&CA) CEO, John Hart, added “The tax was expected to raise $540 million; but at what cost to productivity and our reputation as a great destination to holiday and work.

“We cannot underestimate the importance of transient workers to our industry, particularly in regional Australia. With a jobs growth rate of 14.9 percent, the backpacker tax would further restrict our access to staff," he said.

“Without an available source of skilled and unskilled labour the sector will struggle to reach its target of doubling overnight visitor expenditure to $140 billion by 2020."


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