Rick Wilson (O'Connor, Liberal Party) Share this | Hansard source

I am not disagreeing with that, but this policy had significant implications for tourists coming here on working holiday visas, as it was standard practice for backpackers to declare themselves Australian residents for taxation purposes to the Australian Taxation Office. To qualify as a resident for tax purposes, a working holiday-maker simply had to meet the tax residency rules of the day, which they typically did if they stayed in the country for six months or longer. The flat rate of taxation for non-residents in 2011 was 29 cents from the first dollar earned. The Labor Party increased this rate to 32.5 cents from the first dollar earned—the rate of taxation which became associated with what is now known as the backpacker tax.

By declaring themselves as Australian residents for taxation purposes, working holiday-makers could avoid paying tax on their earnings for the first $6,000. Naturally, when the tax-free threshold increased so too did the benefits to foreign workers. In simple dollar terms, the increase to the tax-free threshold meant backpackers working in Australia suddenly pocketed an extra $4,000. This change meant working holiday-makers could either pay very little tax or avoid paying tax altogether. If a working holiday-maker were to stay in Australia for the length of a calendar year, they could claim the tax-free threshold over two financial years. A non-Australian resident could earn over $36,000 dollars before paying a cent in tax.

In addition to the tax-free threshold, declaring themselves as a resident for tax purposes meant working holiday-makers could access the low-income tax offset. Once they reached the tax-free threshold, they were also subject to a lower tax rate until their earnings hit $37,000. This made Australia an extremely attractive destination for working holiday-makers, but it also represented a cost to the economy. The government of the day had effectively created a situation where working holiday-makers could enjoy the benefits of Australia's first-class infrastructure and services, funded by the taxpayer, without contributing any of their income to the provision and maintenance of those services.

This anomaly was recognised by the Australian Taxation Office when it revisited its interpretation of the tax treatment of working holiday-makers. Prior to the 2015-16 budget, the ATO ruled that, under existing law they should always have been treated as non-residents for tax purposes. The ATO was not alone it its interpretation of the law. Three separate Administrative Appeal Tribunals subsequently considered this matter, and the ruling of each was consistent with the revised position of the ATO. The coalition, acting in line with the ATO and the tribunal, moved to correct what had been a longstanding misinterpretation of the law. In the 2015-16 budget, the government announced its intention to amend the legal loophole and treat most people on a working holiday as nonresidents.

While this move was consistent with the reasoning of both the ATO and the Administrative Appeals Tribunal, it also gave rise to a new and more complex set of problems. Working holiday-makers have become an integral part of regional economies. They provide a secure source of labour in the regions for farmers, horticulturalists, tourism operators and hospitality providers. Short-term contracts that require relocation to a regional town are not always appealing to Australian citizens seeking the stability and security that comes with long-term employment. The sporadic nature of seasonal work makes it difficult for employers to fill these jobs locally. Tourists on a working holiday visa, however, are much more amenable to short-term employment in country areas.

The importance of retaining a steady supply of overseas workers cannot be understated. A major part of the produce that we consume in Australia originates from the regions. Growers in my electorate of O'Connor, for example, produce about one-third of Australia's total avocado supply. In the southern forest regions of O'Connor, Mayfield Park Farm alone produced 75,000 trays of avocados last year, nearly 10 per cent of Australia's total market. George Ipsen, who runs Mayfield, employs up to 400 backpackers during peak production. Producers like Mayfield distribute all over Australia. They are responsible for a significant portion of the produce supplied to the eastern states. The growth of these local businesses also means more of the produce we consume is produced within Australia, limiting our reliance on imports. Mr Ipsen's company, which has grown to become a major industry player, has only been able to do so by employing working holiday-makers. They have been such a key component of his business that Mr Ipsen previously planned to construct a 300-bed facility to house backpackers during harvest months. The prospect of a 32.5 per cent tax rate led him to shelve that proposal until the government's position became clearer.

When the Treasurer made it clear he intended to proceed with the removal of the tax-free threshold for working holiday-makers earlier this year, I took an unwavering stance on the proposal. My regional colleagues and I had a responsibility to support our local economies and outline the adverse impacts of deterring temporary overseas workers. As one of the members of parliament whose electorates relied heavily on backpacker labour, I consulted extensively with affected businesses. I gave a commitment to my constituents that I would do everything in my power to protect local industries from a policy that would reduce the availability of workers. Along with my Liberal colleagues Senator Chris Back and Nola Marino, I attended an industry forum in Manjimup to discuss the backpacker tax. Almost everyone in attendance acknowledged that the current status quo offered working holiday-makers concessions that were far too generous. However, there was an understandable level of concern about going too far in the other direction and making Australia a less attractive destination for working tourists.

Local businesses like Mayfield would be crippled by a reduction in seasonal foreign labour. The Western Australian Farmers Federation estimates backpackers contribute approximately $3.5 billion to the national economy. Brent Finlay, President of the National Farmers Federation, says a 32.5 per cent tax rate for backpackers threatens to drive away more than a quarter of the total agricultural workforce. Just last week, Mr Finlay stressed the importance of a speedy resolution on this issue, saying:

Every day of delay means fewer working holiday makers in rural Australia and fewer crops in the ground.

My colleagues and I relayed the industry's feedback to the Treasurer, and the government announced its review of working holiday-maker visas.

Immediately after the 2016 election I flew to Canberra to seek assurances from the Deputy Prime Minister that the government would find a way to protect the agriculture, tourism and horticulture industries. While there was a significant amount of scepticism surrounding it, the review produced an outstanding result. I encouraged local businesses in O'Connor to make submissions during the review to ensure their concerns were heard by the government. As we know, the government responded by agreeing to drop the proposed rate of taxation to 19 cents in the dollar. I had long advocated this exact rate, as I believe it will ensure backpackers pay an acceptable amount of tax without making Australia uncompetitive as a destination for working tourists. We need to ensure working holiday-makers pay their fair share of tax during their stay in Australia. They access taxpayer funded services, and while they contribute to our economy through the provision of labour in rural areas this should not absolve them of a basic requirement to pay tax on their income. But any rate of taxation needs to be consistent with our international competitors such as New Zealand, Canada and the United Kingdom.

I would like to commend the Prime Minister and the Treasurer for listening to the concerns of regional industries. I would also like to thank the Assistant Minister to the Deputy Prime Minister, Luke Hartsuyker, who led the review into working holiday-maker visas. The review was completed quickly and efficiently, and I believe the proposed changes will strengthen Australia's position as a wonderful destination for backpackers seeking short-term employment. The response from industry has been consistent with my views. The Western Australian Farmers Federation has hailed the government's decision as a 'significant win for industry' and acknowledged the new proposed rate of taxation is 'a fair compromise'. Tourism Accommodation Australia and the Australian Hotels Association both welcomed the government's compromise. In particular, both organisations commended the decision to offset a higher tax rate with a reduction in visa charges and an increase in the age limit to 35.

It should be clear to everybody in this chamber that the government has taken the right approach. We put in place a time line to act on this issue and appease the concerns of regional businesses. We have acted within this time line and introduced the legislation necessary to absolve relevant industries of the burden of a shortage in labour. We have delivered on our commitment to the Australian people. I myself gave a commitment to my electorate that we would alleviate local businesses of the negative impacts of a 32.5 per cent rate of taxation for working holiday-makers. Despite this resolution, one that has been hailed by industries and communities alike, the opposition is failing to act in the best interests of the nation. Since the government announced its plan to tax working holiday-makers from the first dollar earned, the Labor Party has failed to enunciate a clear position on the policy other than to oppose that of the government.

We have now reached the position where the government is ready to make the necessary changes to its original proposal. We reviewed our course of action and we listened to the Australia people. We have formed a policy position that will benefit the nation and we have done it in a timely manner. The review, led by Assistant Minister Hartsuyker, was a quick and efficient process that has paved the way for a resolution before any business has to suffer the adverse impacts of a labour shortage. Yet the opposition appears to feel the need for a further review. The Labor Party has failed to grasp the reality of the situation and its own role in creating the problem. Let us not forget that the actions of the previous Labor government brought us here today. It was the Labor Party, by raising the tax-free threshold, that effectively created a situation where a working backpacker could earn $18,000 in Australia without paying a cent of tax. Make that $36,000 in a calendar year. The coalition has acted on the advice of the ATO and the Administrative Appeal Tribunals and has moved to correct that anomaly. The salient point here is that if the Labor Party refuses to support these changes, the rate of taxation for working holiday makers will default to 32.5c in the dollar. The tax rate they criticised so heavily will come into effect from 1 January if the opposition continues to play politics and drag its heels on the issue.

The suggestion of sending the government's proposal to the Senate Economics Committee is an unnecessary delay in achieving what will ultimately be a positive outcome for the country. The findings would not be reported until next month. Deferring this legislation simply creates more uncertainty for both potential working holiday makers and our regional economies. The government's proposed legislative changes arise from an incredibly comprehensive public consultation process. The opposition is failing to heed the calls of both regional communities and the industries that support them by looking to delay this legislation. The Labor Party has already been condemned for taking this position. The Western Australian Farmers Federation has described the ALP's position as 'an insult'. The organisation's CEO, Stephen Brown, said last week:

This is an unnecessary and distressing delay for the agricultural and tourism sectors, backpackers and employers, and will cost the economy thousands of dollars every day that it is delayed.

Brent Finlay, of the National Farmers Federation, said:

After refusing to declare its hand on the backpacker tax all year, Labor decides to intervene at the 11th hour to block a solution that would see an extra $2000 in every backpacker's pocket.

This is unacceptable and we call on Labor to respect all the decent hard working Australian farmers who feed and clothe us every day by passing the 'backpacker tax' bills in the Parliament.

The Labor Party has access to the submissions made in the government's Working Holiday Maker visa review. The opposition knows the potential impacts of further uncertainty and, in the worst case scenario, the introduction of a 32.5 per cent rate of taxation. Their current position flies in the face of every farmer, horticulturalist and tourism operator who made submissions during the government's review. I call on the Labor Party to cease playing obstructionist politics and support the government's legislation. The opposition must demonstrate its commitment to protecting our regional economies and act in line with the wants and needs of the Australian people. The parliament is beholden to act in the best interests of the nation and the government has a proposal based on extensive consultation conducted right across Australia. I will be encouraging everyone from my electorate who contacted my office, concerned about the proposed 32.5 per cent rate of taxation, to share their concerns with the Australian Labor Party. The opposition must understand the importance of passing this legislation and I implore the Labor Party to reverse its position. I commend the bills to the House.

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