Luke Hartsuyker (Cowper, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Hansard source

I welcome the opportunity to speak on these bills. The government recognises that working holiday makers provide an important source of seasonal labour for both the tourism industry and the agriculture industry. We are also fully aware of the importance of expenditure by backpackers when they come to this country—a very important source of tourism income. This package of measures addresses the significant concerns expressed by regional employers with seasonal labour demands and the concerns of many people in the tourism industry who have made representations to me.

We have heard a lot of bluster from Labor's spokesman on agriculture, but we are dealing with a problem that has come about largely because of changes Labor made to the tax free threshold. Under laws introduced by Labor, nonresident workers in Australia are taxed at 32.5 per cent from the first dollar earned. Recent Administrative Appeals Tribunal decisions have made it clear that, in many cases, working holiday makers are not residents for tax purposes, even though it seems to be standard practice for backpackers to claim residency on their tax forms.

Farmers and tourism operators with seasonal labour needs have expressed concerns that this tax situation will discourage working holiday makers from coming to Australia and will give an advantage to our competitors such as New Zealand and Canada. The government listened to these concerns and before the election gave a commitment to conduct a full review of this issue and the broader issues around seasonal labour supply. We also gave our commitment to the implementation of a resolution to this issue by the start of 2017. We intend to totally comply with these commitments.

I am grateful to the Deputy Prime Minister for asking me to lead the interdepartmental review in this matter. Representatives from several federal government departments were seconded to participate in the review. The public servants from my Department of Agriculture and Water Resources led the review with dedication and skill. I place on record my gratitude for their hard work in this project. The review received submissions from about 1,700 stakeholders, including working holiday makers, employers, representative organisations and state and local governments. Deloitte was contracted to hold face-to-face consultations, which were held in every capital city, with regional stakeholders being offered the opportunity to provide feedback by phone. The consultations were attended by dozens of key industry stakeholders in the agriculture and tourism sectors. I thank all parties who took the time to engage with the review.

I found it curious that the shadow Treasurer, in his speech earlier, accused us of failing to consult with industry. We did a significant amount of consultation—and then, on the other hand, they accuse us of consulting too much! The review confirmed that most Australians think it is appropriate for working holiday makers to pay some level of tax. It is also clear that the tax rate of 32.5 per cent is not competitive with New Zealand and Canada despite Australia's high wages. Stakeholders also made it clear that a solution is needed soon and that further delays will only create more uncertainty, which really does beg the question: why would members opposite refer this off to a Senate inquiry and delay the process?

The government has responded decisively. The measures contained in these bills address the concerns of the agriculture and tourism sectors. We recognised that the tax rate for working holiday makers is not the only factor affecting the supply of seasonal labour, so we have also made changes that will help improve the availability of seasonal workers in Australia. Importantly, we have fully offset the costs of these measures to ensure that there is no further erosion of the budget position—unlike Labor, who always act irresponsibly when it comes to budget measures.

At the centre of the package is a new tax rate for working holiday makers of 19 per cent per earnings up to $37,000. Ordinary marginal tax rates apply thereafter. This new rate of 19 per cent is internationally competitive. After-tax income for working holiday makers will still be amongst the highest in the world. Importantly, this new tax rate will apply from 1 January 2017, just as we promised during the election campaign.

Employers will be required to register with the ATO if they want to offer the 19 per cent withholding rate to working holiday makers that they employ. There will be a register of employers that will be publicly available, so that working holiday makers will be able to quickly identify which employers are properly registered.

Employers that do not comply with their legal obligations may have their registration cancelled. This possibility will become an obvious disincentive for employers to flout their obligation to pay their staff properly. Working holiday makers employed by an unregistered employer will have tax withheld at the non-resident rate of 32.5 per cent, but they will be able to access the 19 per cent rate when they lodge a tax return.

To address concerns about the exploitation of workers, the package also includes $10 million to support compliance activities by the Fair Work Ombudsman and the ATO. This investment in compliance is timely, given the Fair Work Ombudsman's report into the treatment of 417 visa holders, which was released on Saturday. Unfortunately, there are some employers who refuse to comply with their legal obligations, and these new arrangements will give the authorities another tool to discourage illegal behaviour.

We recognise that the number of working holiday makers visiting Australia has been in decline since 2012, but this is due to a range of factors. Even the shadow Treasurer admitted earlier today that the number of working holiday makers has been declining due to that range of factors. This admission is another demonstration that Labor's scare campaign on this issue should be put in the same category as the old Mediscare campaign. Labor know the facts, but they would prefer to play political games. That is just same old Labor.

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