Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016. This bill places a new tax on the wages of foreign backpackers when they are in Australia on a working holiday. This was a measure announced by the government in the 2015 budget. In that announcement, the Abbott government proposed a 32.5 per cent tax on backpackers. Not surprisingly, in what is becoming a familiar chaotic style, the Liberal-National party government is back-pedalling from the original 32½ per cent tax and is now proposing a 19 per cent tax on backpackers. Sadly, the number of backpackers coming to Australia to work was decreasing before the government announced this measure in 2015, but, in so announcing that tax on the wages of backpackers, it has made the situation worse.

The impact of fewer backpackers working in Australia has dire consequences for our horticulture growers. I know this because the Brisbane markets is in my electorate and I have had feedback from several growers about some of the concerns they have. Growers face the prospect of seeing their fruit rot on their trees because they do not have anyone to pick it. Even at 19 per cent, Treasury modelling shows that the backpacker tax will have a detrimental effect on the number of backpackers willing to travel to Australia on a working holiday. Obviously, that in turn will have a flow-on consequence for our farmers. The uncertainty that the Turnbull government has created around this proposed tax has caused unnecessary stress for farmers, whose very livelihoods are at stake—in Tasmania, the north-west of Western Australia, Queensland and everywhere in between.

This is obviously a tax grab by the government. The original proposal was going to rake in $540 million from foreign backpackers. Sadly, the Turnbull government, particularly the Deputy Prime Minister, have handled this issue very badly. They did not consult with stakeholders or do any modelling when they put forward this proposal to tax backpackers. Despite the coalition deal between the Liberal and National parties being very strong about many things, particularly about delaying marriage equality, we saw that the Nationals, the once great party of the bush, completely ignored their constituents, the growers. The premise of the proposal completely ignores the fact that backpackers who come to Australia to work then spend the money they earn here in Australia. It is Australian businesses that benefit from their holidays. Of course, all the goods and services—the holiday products sold to them, the alcohol, the food et cetera—attract GST and are good for our economy. In the LNP's shambolic prosecution of their case for a tax on backpackers, the Liberal government and the very muted National Party coalition partners are now proposing a lower, 19 per cent, tax. Sadly, they have decided to couple this with two other new initiatives. One of these is the passenger movement charge. When this is coupled with the backpacker tax, it makes the bill before the chamber even more problematic. We now not only have the farmers and horticulture growers in a rage in places like Longman; we also have the tourism sector upset, a sector that has been doing it tough since the global financial crisis.

For this reason, Labor supports this bill going to a Senate committee for further scrutiny. The Senate inquiry process will protect our farmers and hear from them. It will protect our horticultural growers and consult with them. Our tourism operators will have a chance to have a say, to ensure that there will not be any unexpected adverse effects on these industries. To avert any more unnecessary uncertainty, Labor will ensure this matter is dealt with before the parliament rises for Christmas.

Obviously, we are in the fourth year of a Liberal-National party government, but hopefully they have woken up to the fact that we need to get the settings on these regulations on working backpackers right. Surprisingly, when you look at the Australian workforce, seven per cent of the working population are temporary visa holders with work rights. In 2015-16 there were 214,583 working holidaymaker visas granted. That is a reduction of 5.4 per cent from the previous year. The working holidaymaker visa program is designed to foster closer ties and cultural exchanges between Australia and our partner countries, particularly with the young adults from these countries who will later be community leaders and business leaders. I do note that, in the program, rather than getting a one-year visa you can also get a second-year extension if you spend working time in the agricultural sector. But I will make more mention of that later in my speech.

To apply for a working holidaymaker visa you must have a valid passport from a country involved in the working holiday program. Not every country that we have diplomatic relations with is able to access the scheme. I have a large Taiwanese diaspora in my electorate of Moreton. Taiwan is one of the top five sources of first working holiday visas, with 14,803 first visas being granted last year. Taiwan is the second largest source for the second year of working holiday visa grants, with 7,354 issued last year. Ninety three per cent of second working holiday visa applicants indicated that they engaged in agricultural work.

Last year, because of the number of Taiwanese taking up this scheme, I travelled to Bundaberg with Ken Lai, the Director General of Brisbane's Taiwanese Economic and Cultural Office. We went up to Bundaberg. We went out to some farms—tomato farms in particular—and met some of the young backpackers. We went out for dinner with them. We chatted to them about the hourly rates and the piecemeal rates that they were being paid. I will touch on that now.

The Horticultural Award 2010 provides for a minimum hourly wage of $14.31—not a lot of money, obviously, but a minimum of $14.31. However, there is also the capacity in section 15 of the Horticultural Award 2010 in Queensland to get the piecework rate. Clause 15.2 of this award says:

The piecework rate fixed by agreement between the employer and the employee must enable the average competent employee—

average competent employee; that is important—

to earn at least 15% more per hour than the minimum hourly rate prescribed in this award …

So that would be, effectively, an extra $2.15, which would bring you to $16.46. That would be the minimum rate at the moment under the Horticultural Award.

The piecework rate agreed is to be paid for all work performed in accordance with the piecework agreement.

Obviously, you would also get the casual loading, if that was the workplace relationship. Clause 15.6 of this award says that you must agree to the piecework agreement 'without coercion or duress'. And clause 15.7 says:

The piecework agreement between the employer and the individual employee must be in writing and signed by the employer and the employee.

That means it must be understood by the employee. Also, the employer needs to keep a copy of the piecework agreement and keep it as a time and wages record.

I stress that because, in our travels around Bundaberg and in meeting some of the working holiday backpackers, we found that certainly many of them expressed concerns about the idea of the average competent employee. And, certainly, they had expressed the fact that they could not earn enough money—anywhere near that $14.31, which is the minimum hourly wage, before the penalty rates kick in.

Sadly, Ken Lai and I—and others in the Taiwanese community—have realised that there are unscrupulous operators who will take advantage of these optimistic, fun-loving backpackers. Sadly, sometimes they are the middlemen or the middlewomen, not the farmers or the horticulturalists who just want to get their crops. Basically, the person comes from the plane to the farm with no interaction with any opportunity to pick up the information about what they should be paid and what is normal.

The Fair Work Ombudsman has just released a report into the wages and conditions of people working under the working holiday visa program. The ombudsman received 1,820 requests for assistance from visa holders last year and recovered over $3 million owed to these visa holders. When the visa program was expanded a decade ago, it introduced an option for young visa holders to extend their stay in Australia for a second year. The condition of being granted the extension was that they had to undertake 88 days of specified work in regional Australia during the first year of their visa.

The Fair Work Ombudsman inquiry found that the vulnerability of young visa holders was increased if they chose to undertake the 88-day placement in order to be granted the second-year visa. According to the report: young visa holders are being exploited by underpayment and or non-payment of wages; visa holders are making payments to employers or third parties for assistance to gain a second-year visa; there are sexual harassment and workplace health and safety breaches and issues; employers are recruiting visa holders to undertake unpaid work to meet the second-year visa requirement—because they seem to have them over a barrel; visa holders are working for free in exchange for non-certified accommodation programs—which would be not what the Horticultural Award is about at all.

The inquiry found that: unreasonable and unlawful requirements are being imposed on visa holders by unscrupulous businesses; exploitative workforce cultures and behaviours are occurring in isolated and remote workplaces, especially; employers are making unlawful deductions from visa holders' wages, or unlawfully requiring employees to spend part or all of their wages in an unreasonable manner.

In particular, the inquiry found that visa holders from Asian countries were more likely: to have lower awareness of their workplace rights in Australia; to have money deducted from their pay without a verbal or written agreement—against the award; to be paid to complete the requirements to obtain a second-year visa—completely against what the program was set up for; to have paid an agent to secure regional work to meet the eligibility requirements of the second-year visa. This was similar to the experience we discovered when meeting the backpackers around Bundaberg.

The inquiry uncovered many instances of unscrupulous behaviour by employees all over Australia.

In the Northern Territory, where a labour-hire intermediary engaged young visa-holders to perform pruning, weeding and fruit-picking duties on mango orchards in Darwin, the workers were paid amounts equivalent to hourly rates of between $2.74 and $4.79, well below that piece rate of $16.46; and some workers were not even paid at all. The amount alleged to have been underpaid across the workers was more than $35,000. There were examples in Victoria of people picking, washing and packing six hours a day for six days a week in return for accommodation. In northern New South Wales, a business that grows and supplies cucumbers to Coles and Woolworths via an agent, and sells to local stores, was withholding all wages from those visa holders in exchange for providing food and accommodation.

In north Queensland—even in Queensland, Member for Longman; can you imagine it?—a business advertised for backpackers for an unpaid position, saying it would then sign off on their second-year visas, and food and accommodation was provided. There is a mushroom farm near Brisbane, not far from my electorate of Moreton, where workers were employed on piece rates, but they were not able to earn a sufficient wage under the agreed rates, with almost $650,000 in underpayments.

Sadly, it is hard to get information about workplace rights into the hands of working holiday backpackers. As I said, often they go straight from the airport to the farm, and obviously, sadly, these are non-unionised workforces, so it is hard to get the information to them. Early in November I will be going to Gatton, perhaps with the member for Wright but certainly with Ken Lai from the Taipei Economic and Cultural Office again to try and talk to some more backpackers. We will also visit the site where a 19-year-old girl from Taiwan, Chung Jia-Ying , was hit by a truck on 9 August and, sadly, killed. We will pay our respects, for her family, but also try to catch up with some other backpackers in the area.

It is important that any changes to regulatory frameworks around working holiday visas take into account the current exploitation that is occurring. We cannot just govern and hope for the best. We need to have tighter scrutiny. I think, from memory, there were about 17 Fair Work inspectors for, as I said, nearly a million workers, so it is hard to get those inspectors out, especially to remote areas. I found it hard even in Bundaberg, an area I know very well, to actually get onto the farm and into the workplace to talk to people—and sometimes people are not that keen to talk.

It is important that stakeholders, including farmers and horticultural producers and the tourism sector, are fully consulted about any proposed changes. There should be thorough consideration of this bill so that all perspectives can be considered, as well is the full implications of any changes. So Labor call for this bill to be scrutinised by the Senate Economics Legislation Committee before any changes are made to the conditions for young foreign backpackers working in Australia. They mean too much to our agricultural sector and too much to our good name abroad. If these foreign workers have this experience and then go back home and talk about being exploited or sexually harassed, or unsafe work practices, they will not be the ambassadors that we are trying to create.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

I welcome the opportunity to speak on the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016, and to thank the government for implementing the changes we needed to ensure that this vital labour source will still be available to the cultural, hospitality and tourism industries that so need it, especially those in my electorate of Forrest, in the south-west of Western Australia.

The Turnbull government recognises that working holiday makers are an important part of Australia's $43.4 billion tourism industry. They are also a key source of labour—a key source of labour—in the agricultural, horticultural and hospitality sector. Industries in the south-west of Western Australia simply could not survive without the labour input from working holiday makers, the so-called backpacker community.

Look at businesses that I have visited recently, such as Capel Farms, who grow amazing broccolini. It is a very labour intensive industry, and that is why the backpackers are so vital. I look at Neil Delroy; as an avocado grower he is in the same position. I went down to Augusta and talked to the Augusta Hotel; they rely on backpackers to work in the hotel, in hospitality. There are vegetable growers and fruit growers around Donnybrook and Myalup. Of course, without backpackers often what we see is the fruit rotting on the trees and on the ground. The vineyards of Margaret River and the hospitality sector rely so frequently on backpackers. They are needed by the olive farms around Yallingup. Dairy farm hands are required, as are workers for abattoirs.

The program has grown significantly since its inception in 1975. There have been over 200,000 working holiday makers coming to Australia each year since 2011. In the early days of the program, the south-west attracted most of its working holiday workers from Britain and Ireland. Then, in the eighties and nineties, we saw an increase in European visitors, especially from France, the Netherlands, Germany and Italy. In recent times, working holiday visa holders have arrived predominantly from Asia, especially Korea, China and Japan. All of these groups have added to the cultural experience and growth of the south-west. There were 2,114,583 working holiday maker visas granted in 2015-16.

It is obviously essential—absolutely essential—that the workers keep coming, so it is vital that the decision on this bill takes place now. If you are a grower of any sort and you are planting and picking, you need to have confidence that you will have the labour to not only plant but also harvest the crop. That is why Labor's amendment is so fraught for the industry. If this reform package is not passed, the ATO will tax many working holiday makers as nonresidents at the 32.5 per cent tax rate. This means that many of them will simply not come to Australia, choosing instead to travel to lower-taxing destinations. The Administrative Appeals Tribunal has ruled that backpackers can be taxed as nonresidents under the current law, which was implemented by Labor when last in government. Labor's plan to refer the working holiday-maker reform package to the Senate Economics Committee will cause great uncertainty and confusion for our farmers and the seasonal workers as we enter the peak harvest season. I am not sure what about this those on the Labor side do not understand, but clearly not enough of them live in, work in and represent rural and regional electorates and the farming, growing, hospitality and tourism sectors.

Farmers across Australia have made it crystal clear that it is a vital to have these bills passed as soon as possible, but Labor is not bothered by that at all. Labor's plan to refer the bill to the Senate committee is absolutely reckless and destructive. The National Farmers' Federation has made the position of the agricultural sector very, very clear, but Labor is ignoring this. The National Farmers' Federation said:

Farmers can't wait until the end of the year, or even next year, for a resolution of the issue.

They went on:

After refusing to declare its hand on the backpacker tax all year, Labor decides to intervene at the eleventh 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.

There is no justification for any further delay.

I repeat that there is no justification for any further delay. But, of course, that is not going to stop Labor from delaying this.

We, as a government, also recognise—as do the stakeholders we have repeatedly consulted—that while working holiday-makers should pay fair tax on their earnings, this should not provide a massive disincentive for them to come to Australia. From 1 January 2017, the government intend under this bill to set the tax rate applying to working holiday-makers at 19 per cent on earnings up to $37,000, rather than the 32.5 per cent announced previously. The government will also reduce the application charge for working holiday-maker visas by $50 to $390. These changes will lower the cost of coming to Australia for working holiday-makers and leave them with more money in their pockets to spend while here, which stimulates regional economies and supports regional businesses.

When I had a meeting with a group of businesses it was interesting that one of them ran a local gymnasium and exercise area and so many of the backpackers who were in the local area were his clients and his customers. So they involve themselves in many parts of the community, and their dollars often circulate within the community that they are living and working within.

We will also seek to boost the arrivals of working holiday-makers, which have been in decline since 2012-13 as a consequence of factors including exchange rate variations and changed economic conditions in source countries. We will introduce more flexible arrangements that will benefit working holiday-makers and industry. This will involve allowing an employer with premises in different regions to employ a working holiday-maker for 12 months, with the working holiday-maker working up to six months in each region. We will also task Tourism Australia to promote Australia to potential working holiday-makers through a $10 million global youth targeted advertising campaign. It is a great initiative.

The government is also keenly aware of concerns about exploitation of working holiday-makers. To generate more accurate data and boost integrity of the scheme, employers will be required to undertake a once-off registration with the Australian Taxation Office—a good check and balance. This simple and easy registration process will help provide valuable data on the employment of working holiday-makers. Employers who do not register will be required to withhold tax at the 32.5 per cent rate. Working holiday-makers will be made aware of registered employers via the publication of a list on the ABN Lookup. I am sure that this will appear on a range of online sites that promote backpacker opportunities in Australia.

The Turnbull government's package of reforms to working holiday-maker arrangements will therefore not only ensure working holiday-makers pay fair tax on their earnings but also increase Australia's attractiveness as a top destination for backpackers. The government's strict budgeting rules have applied to ensure the budget impact of these measures and changes is fully offset. We will increase the tax on working holiday-makers' superannuation payments when they leave Australia to 95 per cent, which is consistent with the objective of superannuation, which is to support Australians in their retirement not to provide additional funds for working holiday-makers when they leave Australia. There will also be a one-off increase of $5 to the passenger movement charge from 1 July 2017.

The decision to reduce the proposed tax rate from 32.5 per cent to 19 per cent maintains Australia's status as one of the most competitive destinations for working holiday-makers, whilst also ensuring that they pay a fair level of tax—something equally important on this side of the House. This year, the coalition committed to review a wide range of issues affecting the supply of seasonal labour in the agricultural and tourism sectors. The review was duly completed, and this reform package is the result of a very significant consultation process. The government has listened, acted, and delivered on this important issue.

For the sake of the coming year's harvest and the impending tourism season, Labor must support the swift passage of the entire reform package through the parliament. Agriculture and tourism make a fundamental contribution to the local economy of the South-West and to so many other rural and regional communities right around Australia—something that Labor obviously does not value. This bill is a win for South-West farmers, who will be able to get their fruit off the tree, off the vine and off to market. It is one more way that we are working to ensure the South-West remains a vibrant hub of industry and employment into the future.

Many regional members of parliament, like me, have been fearless champions on behalf of their electorates, their agricultural stakeholders and common sense on this issue. The bill before us today is a direct result of our hard work and persistence. It means that local businesses can continue to rely on strong seasonal labour support. The peak tourism and harvest season will be with us soon, with thinning of fruit and vines giving way to harvest in the New Year. There is a great sense of urgency that we need to get this sorted now. Backpackers planning to travel to Australia from a range of countries are already making decisions about where they will go, and they need certainty about the tax treatment in Australia now, not at some time in the future, as Labor says. If that certainty is delayed for weeks and months, those vitally needed backpackers will likely start choosing to go elsewhere. They will go to New Zealand or Canada instead of coming here, and that will be disastrous for our industries. We need to act now.

I thank all those regional members of parliament who advocated so passionately for their constituents and their business communities. Although he is no longer in the parliament, I include former Senator Richard Colbeck in those thanks. Richard was a passionate advocate for rural and regional industries and communities, and his position on this issue was a great demonstration of his capacity and leadership.

This was a significant issue for many regional coalition MPs during the recent election and still is significant. By holding the line and acting as a team we have achieved the outcome that was desperately needed. It is now time for regional Labor MPs to step up to the plate and get this through the parliament and into practice. Our regional economies are relying on it.

Mike Kelly (Eden-Monaro, Australian Labor Party) Share this | Link to this | Hansard source

It gives me great pleasure to rise in support of the shadow Treasurer's amendment to the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 and related bills, in particular because my region is one of the epicentres of this problem. I have a large number of fruit growers on the South West Slopes, I have wine growers in the Yass Valley, and there are many other enterprises that are affected in the tourism sector in my region. Yes, I am a regional Labor member and, yes, I am stepping up to the plate right now, because there is no bill that this parliament has seen that better bells the cat on this government for its dissembling and denial or better gives the lie to its claim to be the best representative for the bush. As you know only too well, Mr Deputy Speaker Coulton, as the member for Parkes in New South Wales, people in the bush are abandoning the Liberal Party in droves because of what they are inflicting upon people in regional Australia.

This tax was created by the government. I heard the member for Cowper claim: 'This problem of backpackers and the guest worker situation was a developing one before the tax was introduced.' Yes, it was, so why did they multiply that problem by 32.5? It is like saying, 'We've got a bushfire here, so let's bring in the fire tenders,' only to see the fire tenders turn up loaded with kerosene instead of water. The growers are already in a situation where backpackers have deserted us in droves; they are having that problem now. The tax has made the problem much worse.

Of course, those opposite talk about the need to speed this through. Where was this bill last week? Why has it been introduced only now? Where was the urgency last week? It is amazing to me that those opposite can come in here bald-faced and say, 'Don't you make this a problem, Labor!' They created the problem! It is like saying: 'Look, we've taken four wheels off this car and we're prepared to put one back on. Now you guys have to come along and help us push-start it.' The bald-faced, brazen approach that this government is adopting in relation to this legislation is unbelievable.

I note that we wound the situation back to 19 per cent from 32.5 per cent and that the National Farmers Federation have come on board with this proposal. Of course, it would be really nice if the National Farmers Federation actually fought the good fight to make sure that all of these impacts do not apply to farmers, instead of being just a stepping stone for people who want to enter parliament for the National Party. I understand they have had a gun held to their heads about this issue, but it is not true to say that farmers are saying, 'Let's just get this done and move on.' In evidence of that, I would like to read out an email that I received from one of my farmers, a Batlow fruit grower on the South West Slopes. He said:

Mr Kelly

I am writing to you about the recent announcement on backpacker tax. I manage our family apple orchard in Batlow. We are a vertically integrated business. We grow the rootstock, apple trees, pick pack and have a wholesale business in Sydney Markets. We supply all major supermarkets and independent retailers and are currently opening up new export markets.

Our reliance on overseas workers is crucial for the survival of our business especially in Batlow. We have a constant problem wondering if we will have workers available to complete our daily tasks. Due to the location it is especially hard to find people available to meet our work requirements. Transport and accommodation add to the problem. Now to add to this equation an increase in tax from the first dollar earned and what I think is highway robbery, they the government are suggesting to take 95% of superannuation when they leave. Now I don't think I am wrong in calling this another tax grab …

We have gone from a tax rate after the threshold of 15% to now a tax from dollar one of approximately 27%. How is this going to help us attract workers?

That is the voice of a farmer who has written to me. So, let's not talk about what is in the best interests of the farmers. We know what is in the best interests of the farmers, and that is consulting with them when you take a measure; that is doing the modelling of the effect of a taxation measure. Clearly, the government just raced into this without understanding what that effect would be. On the one hand, of course, they need to offset the $50 billion tax giveaway to big businesses and big banks—who my farmers complain to me about on a daily basis—and on the other they need to try to claw back $540 million in this place, which hurts farmers. The real fallacy of this, of course, is that that $540 million is a complete myth. It is exactly like killing the goose that lays the golden egg. If there are no backpackers coming, you will not earn $540 million. It simply will not be there. It is an approach to doing taxation in this country that shows that the government completely lacks any understanding of creative taxation policy.

We hear those opposite talk about Labor's history of tax management—they always say we are high taxing, high spending. The truth is that the recent Labor government had a lower tax-to-GDP ratio and was a lower taxation and spend government than both the Howard government and the current government. When this government wants to give away billions of dollars to big banks and big overseas corporations at the expense of farmers, sure, we will fight that—we will fight it all the way. Our approach to budget repair is to create new growth, new economies, and to ensure that jobs are there for Australians and that our farmers are supported. This bill does not do that. The first measure did not do that—it hurt them terribly. We want to make sure this goes off to a quick review that does the modelling, that consults and that has the input from stakeholders so we can decide whether or not this whole 19 per cent tax measure should be revisited as well, whether we should go back to first principles on a measure like this so that we do not kill off this labour force and this industry.

The government also does not look at the welfare issue of backpackers. If you want a backpackers to come here it is not only an issue of attracting them because of what they can gain when they get here, the experience that they can have; it is a matter of their welfare while they are employed. If the word goes back to young people overseas, who are highly networked on modern social media, that you will be mistreated while you are here as well, then that is also a turn off. Those are issues we need to turn our attention to as well.

We know the numbers are declining; we know this government has slugged this industry. It has hurt our tourism industry and also wants to make it a double whammy by adding this tax to travellers as an offset. The government admits that Treasury modelling shows that backpacker numbers will continue to decline with tax at this 19 per cent rate. That is why we want this measure to be reviewed, why we want to have a closer look at it. While we want it reviewed, Labor will expedite the passage of the bill through the House but we will seek to protect our farmers through the Senate inquiry process. This should have been debated last week, and it should have been with the Senate right now.

This is part of an assault on rural and regional Australians particularly in New South Wales. I know there are many members—people I am happy to call friends—on the other side of this chamber who represent regional areas who understand what is going on in New South Wales at the moment. They will admit that there is a strong sentiment among people all around rural and regional New South Wales that they have been let down. It goes back to Gonski. Gonski was a program that was going to deliver rural and regional loadings, which are so important to schools in my region. I have noticed huge improvements from the early-stage implementation of Gonski, and that needs to be sustained. The removal of those loadings, Indigenous kids loadings and the like, is hurting our rural and regional schools.

I get bombarded by people in the bush who are complaining about the way the NBN process is being managed by the government. This was the great potential means we had in rural and regional Australia to unlock our human potential and to enhance and improve our business operations, including farming, with the modern use of technology that the NBN would provide. They are not happy with how it is being handled. There have been forced council mergers in New South Wales. You will know well, Mr Deputy Speaker Coulton, how that has gone through New South Wales like a brush fire. People have resented the way they have been treated—these bulldozer tactics of Mr Baird and his government. They have failed to consult effectively, and bureaucrats have been sitting in Sydney drawing big red crayon lines across a map without regard for the communities of interest or the geography. People in Tumbarumba, in my electorate, are absolutely red-hot angry at how they have been treated, as are the people of Bombala. The great mayor down there, Bob Stewart, has been a wonderful advocate for his community, and he first found out he had been sacked when he heard it on the radio. He did not even receive a phone call from the state government. He was in tears about how he had been treated. These people in these communities have not forgotten. They have signs all over their areas warning of what is coming from this state Liberal government.

In addition, we have seen the greyhounds decision. I know a lot of my National Party friends in New South Wales fought a good fight on that and finally got Mr Baird to see reason. This person, who claimed to be the great moral leader of New South Wales, trampled over an industry of rural and regional Australians. He trampled over it unjustly, without due consultation and consideration of how the issues—issues that are certainly there in the industry—could be managed with people in the industry still being employed, still keeping their livelihoods.

We have also seen in New South Wales Mr Baird talking about the privatisation of some of our rural hospitals. I do recognise that they have been put in a difficult position by the fact that the coalition government has cut funding in support of the state health system, but they are seeking to triage their issues in health in New South Wales rural and regional areas. The wonderful South East Regional Hospital in Bega, built through the use of Labor's Health and Hospitals Fund, is a magnificent facility but everyone is deeply concerned that the services that should be getting provided through that facility are not being provided because the state is not providing support for those services. This lack of services, with cuts to funding and privatisation of hospitals such as Goulburn, just north of here, is causing deep concern in our rural and regional communities.

What did electricity privatisation do? Exactly what we said it would do. We said electricity would cost more and that many jobs would be lost in rural and regional Australia. In my region hundreds of jobs have been lost through electricity privatisation. We also said it would lead to security issues, as we have seen with Ausgrid. People are also telling me that the government did not consult with Defence in that process until it was too late and they had to pull the pin on the project at the last minute. In addition to that we have seen services wound back in Centrelink and veteran support. They are asking veterans who live in rural areas to go online to get help, removing the face-to-face support they used to get. Services in Centrelink are grinding to a halt because of the continuing application of unsustainable efficiency dividends and cost cutting.

These all add up to a massive assault on rural and regional New South Wales and Australian rural and regional areas more generally. And I am inundated by communications on a daily basis as to the effects of these cutbacks—the human cost of these cutbacks and the human cost of what the coalition government in New South Wales, suffering from the impacts of federal decisions, is doing and what that means for our community.

We are not going to put up with it. They will pay a price. I remember very vividly the massive wooden sign, that was hand-carved, that was put up in Tumbarumba during the last federal campaign, and it said very clearly: 'If Tumba falls, goodbye Peter Hendy.' They have now replaced that with a similar sign talking about 'goodbye Liberals'. You can go and drive out there and read those signs. I am not making this up. That sentiment is strong. It is palpable. And I believe that, when the time comes, not only will we see that reflected again in the federal sphere but this state government in New South Wales will feel the voters' wrath from treating rural and regional New South Wales as some peripheral area that can be neglected without cost because they are traditionally safe seats.

But people are learning that the good old days, of Bill Sheahan and Terry Sheahan in south-west New South Wales, of Eddie Graham down Wagga way, of Allan Fraser and Jim Snow—these people who were good regional rural Labor people who always looked after them and always cared for them—are coming back again as we see strong country Labor people putting their hands up to be a voice to defend these communities. They are not getting their voices heard at the moment by current representation in the coalition, and it means they have to look elsewhere. Well, we are there for them. We will defend them. We will continue to defend them. And we will make sure that the effects of this tax are eliminated in terms of the viability of their businesses.

George Christensen (Dawson, National Party) Share this | Link to this | Hansard source

With your indulgence, Mr Deputy Speaker, I just want to recognise my good friend in the gallery, Nathan Ell, who has come all the way from Dubai to hear me speak. He probably needs to get out more!

I rise to speak on the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016, the Treasury Laws Amendment (Working Holiday Maker Reform) Bill 2016, the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016, and the Passenger Movement Charge Amendment Bill 2016. When the so-called backpacker tax was originally announced by the then Treasurer Joe Hockey, most people, I think, thought that that was pretty innocuous. The Treasurer would have thought so at the time as well, given that he was acting on advice from Treasury.

But there is a hard lesson to be learnt there—indeed, several lessons to be learnt. The first is that any advice coming from Treasury needs to be well and truly road-tested before being acted on. But there are more lessons to be learnt from how the impact of this measure came to be underestimated in the first place. This is no criticism of Treasury, or anyone else for that matter, because the underestimation of impacts was based on sound reasoning. But there is a flaw, and I will come to that shortly.

The most important and most debated element of these bills was the imposition of a 32½ per cent tax on the earnings of Working Holiday visa holders from the first dollar they earned. There was a very logical reason why such a change was necessary—and that is because when Labor raised the tax-free threshold, it meant that most backpackers, who worked for only part of the year, would no longer pay tax at all. That situation, I have got to say, was pretty disheartening for Aussie workers who worked all year round and took home less money for their day's work. They could have been working alongside someone from overseas doing the same work in the same conditions but taking home less money on a daily basis.

While the 32½ per cent tax rate from the first dollar was high, it was only applicable to overseas workers, and I must say that, when it first came up, I did not fully understand the implications that such a high tax would have on certain industries, particularly tourism and agriculture. But I spent a lot of time talking with farmers in my electorate about their workforce and how they sourced that workforce. I spoke with tourism businesses who faced similar problems securing workers when they needed them.

Although Bowen, in my electorate, is only a small town on the Queensland coastline, it is home to an extraordinarily large backpacker workforce. Bowen farmer and President of the Bowen Gumlu Growers Association, Carl Walker, wrote to me about the backpacker tax, outlining the importance of the produce from that region. He wrote:

During the peak of our season, up to 95% of Australia's fresh tomatoes and capsicums come from the Bowen and Gumlu locality.

Without this link in the seasonal supply chain, we would see much more produce imported from overseas and fewer local jobs sustained—fewer jobs for backpackers, but also fewer jobs for Australians. Mr Walker went on to say:

With the sheer magnitude of roles that need to be filled each season, to maintain the picking and packing volumes it is near impossible to locally source. As a region of a small permanent workforce population, we prefer to employ locals wherever possible but rely heavily upon backpackers and the seasonal worker programme to fill these very short-term and arduous roles. With the proposed tax increase for backpackers, this leaves a large tax gap between the two employment sources.

And Mr Walker, I have to say, is a very straight shooter and a smart thinker. He put forward suggestions for a compromise. We did not go as far as that, but his compromise was this:

All foreign workers should be on a 15% flat tax rate, with no tax-free threshold and no superannuation payments or tax refunds returned to their pocket.

He further suggested employers should:

… have to pay 9.5% superannuation to every employee, Australian or not. It should be considered that the foreign workers' superannuation could go into a fund which could then be utilised for training and upskilling a younger generation of Australian agricultural employees, helping to relieve pressure on the budget deficit.

Chairman of Tourism Whitsundays, Allen Grundy, also wrote to me, voicing concerns about the drop-off in backpacker visitor numbers. He wrote:

The latest international visitor arrival stats are mixed, showing continued growth to the Whitsundays of 6.2% to Year End June 2016. However, this result is somewhat tempered by the big declines in youth / backpacker arrivals.

Mr Grundy reported that backpacker nights and visitor numbers were down across centres on the east coast. In the Whitsundays, visitor nights, or length of stay, were down 23.5 per cent and visitor numbers were down by 6,000. Mr Grundy wrote to me again—just today, in fact—pointing out that backpackers working overseas was a two-way street. He says:

There is a lot of discussion suggesting that Backpackers take the jobs from young Aussies. It is important to note that the reciprocal arrangements for Working Holiday Visas mean that there are plenty of young Aussies overseas working on a gap year, just like those Backpackers coming to Australia. The community benefits when these young Aussies return home with new skills, they have had to fend for themselves and quickly learn to be responsible for basic life skills, for example, finding accommodation, buying food, paying the bills, budgeting etc. The skills that they learn by being away from home set them up to be more versatile, self-sufficient, confident and very employable.

After many meetings with businesses across my electorate, it became clear that some North Queensland industries would indeed have been smashed by that tax rate of 32½ per cent. There would have been a great deal of damage to the sugar industry around the Burdekin, to horticulture in the Burdekin and Bowen and to tourism in the Whitsundays. When the increased tax rate was first raised, my view was that Australian workers should be filling these positions. Around Bowen especially, where the unemployment rate is around 15 per cent and the youth unemployment rate is much higher, you would expect that there would be plenty of workers available to sustain the horticulture industry—and this is where more lessons need to be learnt from real life in this exercise. We cannot assume that the number of jobs available and the number of unemployed locals will cancel each other out. In reality, this does not happen—not even close.

When I was speaking with farmers they told me reasons why there was a greater reliance on backpacker labour than there otherwise ought to be. We know that the volume of workers needed will always outstrip local labour capability and availability, so at least some workers will always need to be sourced from elsewhere. But local unemployment remains high even during the peak harvesting season in Bowen, simply because many locals do not want to do that work. The farmers tell me that some locals will put in a token effort; they might have been forced to take the job through one of the jobactive providers. They turn up late or hung over. Some will deliberately work slowly. Some even go to the effort of breaking things on farms so they can get fired.

Given a situation where Australians prefer social security and welfare over actually working, we can do one of two things: we can accept that Australians will never ever do that work and just carry on; or we can do something with the welfare system to make sure those people are not turning down available jobs. To take the second option will be a long-term project and a difficult road to negotiate—a tough row to hoe. But the longer that row is left the worse the weeds will become and the harder the job will become.

I remember when the union movement brought their China free trade agreement debate roadshow into my electorate. They thought I would not turn up to debate it. But I did. And all the mouths were agape when I turned up. They said I was a terrible member of parliament because there were thousands of foreign workers in my electorate picking fruit while there were thousands of unemployed youth. If only it were that simple. In the short term, however, the immediate fix to this problem is to make a compromise on the backpacker tax to ensure backpackers continue to meet the labour needs of those industries—and finding a sensible compromise is, I believe, what we have done.

The bills we are debating here today are the kind of outcome I was confident we would achieve when during the election campaign a local reporter asked me what would happen if the backpacker tax remained at 32½ per cent. I assured her it would definitely change, but she remain unconvinced—as did some of the local farmers. I said I was so confident of that change that I would quit the party if it did not happen. I said that not as some kind of threat but as a demonstration of how confident I was that such a change would be made. I said that knowing it would be fixed because the Deputy Prime Minister understood the need for it to be fixed. I must congratulate the Deputy Prime Minister and Minister for Agriculture; the Assistant Minister For Employment, the member for Cowper; and also the Treasurer for listening to the concerns of backbenchers, for listening to the needs of industry and working hard to resolve this issue. I want to acknowledge the work put in by groups such as Tourism Whitsundays, the Bowen Gumlu Growers Association and Canegrowers. These groups got their message across clearly and professionally and, to their credit, always with a view to finding the best solution not just for the industry but for the country as a whole.

I note there are some voices that are calling for a zero tax rate on backpackers. There might be some good rationale behind that, but I want to state my view as to why it should not happen. As I said, the Labor Party essentially delivered a zero tax rate for these backpackers when they brought in the higher tax free threshold—a good thing. They increased the tax free threshold to $18,000. But that move, resulting in foreign workers paying nothing, was really a slap in the face for Australian workers who do pay tax. Representing one of the country's biggest tourism centres, I very much appreciate the need to make visitors to our country feel welcome. But I think we should draw the line at elevating backpackers to a more privileged status than working Australians. We must remember that these backpackers are coming here and using services—our roads, our public transport and on and on it goes—and it is only fair that they pay some level of tax for the usage of those services.

Another measure contained in these bills is to increase to 95 per cent the tax on working holiday makers' superannuation when they leave Australia. I think that is a fair income. I will explain why. It is consistent with the purpose of the superannuation system and the need for equity in the workforce. It is important to note that all workers must be paid their super entitlements regardless of whether they are Aussie citizens or working visitors. But exempting foreigners from the superannuation guarantee would have made it a disincentive to employ Australians—and I know there were some proposals out there to do that. However, the super system is designed to support Australians in their retirement—it is for workers retirement. Allowing working visitors to cash in their super simply allows them to go and blow it in Bali, Taiwan or someone else on their home. That is not the intention of the superannuation scheme whatsoever.

That is why Carl Walker was saying we should take the super and put it somewhere else. So we have taken the super and put it into savings to enable the repeal of the backpacker tax. So while I am pleased that this labour force issue has been resolved, we expect the affected industries—that is, agriculture and tourism—to return to normal. I am hopeful there is going to be a significant uplift in backpacker numbers, particularly into the Whitsundays. It is almost a perverse outcome. It is a great outcome. Bringing this tax in scared some from coming. But, now that it has gone, a whole heap of them will come to the Whitsundays, and I suspect that there will be a bit of a boom over the next year.

But just as I was concerned about the tax implications of the backpacker tax I have to say I am also concerned about the increase in the Passenger Movement Charge. While I acknowledge that the $5 increase might be small, it worries me that, into the future, the Passenger Movement Charge might be viewed as something like tobacco excise—a cash cow that government can continue to raise and raise and no-one wall complain about. We are doing it. The Labor Party have done it in the past. I think that trying to treat that charge like an ATM to fund spending, because it can just be raised higher and higher, and then trying to justify it by claiming people who travel internationally are rich is beyond the pale. I am going to be keeping an eye on that change to see if it has a detrimental effect on the tourism industry, and I will be taking that issue up with the relevant ministers.

In closing, I note that Labor wanted to refer this reform package to the Senate Economics Legislation Committee. I must stress that that is a reckless act and it will cause a disaster in agriculture. Farmers have made it clear that that will be destructive. Labor's plan would create a great deal of uncertainty and confusion for farmers. The farmers have made it clear that the changes need to be passed as a matter of urgency. That message was delivered during the review process.

They on the other side might have missed it because they were too busy doing a victory lap after losing the election, but the government committed to reviewing a wide range of issues surrounding seasonal labour supply. The review has now been completed, and this reform package is the result of that consultation process. The National Farmers' Federation made their view clear with a statement that said:

"Farmers can't wait until the end of the year, or even next year, for a resolution of the issue …

"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.

"There is no justification for any further delay. …"

I agree with the sentiments expressed by the National Farmers' Federation: there is no justification for any further delay. I hope the Labor Party will see that and get on with it.

One of the additional measures in this reform package is that we are now going to regulate who employs foreign workers, and I think that will also be very good in the future for cleaning up some of the nasty stuff we see going on within the backpacker industry. I do commend these bills to the House.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

The proposal was to impose a 32.5 per cent tax. The current situation is that we will impose a 29½ per cent tax. I think my worthy colleague and neighbour in this place, the member for Dawson, speaks genuinely and sincerely on behalf of his electorate at all times. We thank him and his colleagues for a reduction of three per cent. We do not have any illusions that we are applying a tax of 30 per cent. It was a little bit over 30 per cent before, so there really has not been much change at all.

When it comes to this place, there are two great problems with the National Party. My first problem is its performance in this place; my second problem, which is infinitely worse, is that I have seen how the party representing non-city Australia should perform—and the latter problem is probably more important than the first.

The most wonderful example of that that I can provide was when, after a decade or so of Labor in the federal parliament here, the Menzies government was elected. Within weeks Mr Menzies announced a revaluation upward of the Australian pound. Within two days the titular leader of the National Party, Jack McEwen, announced that there would be a devaluation. Two weeks later Mr Menzies announced a devaluation, not a revaluation. The reasons for that was that the National Party—the then Country Party, as it was called—walked out of the coalition and brought down the Menzies government. It could be argued that they briefly brought down the Lyons government. But on three occasions they voted with the opposition in this place, asserting their muscle power and having the courage of their convictions to represent the people that they were paid to.

The first act by the Country Party after the war was to fight the 'Battle of the pound', as it was called on the front of the Sydney Morning Herald. The last act of the Country Party before it disappeared was under Doug Anthony. Prime Minister Billy McMahon announced a revaluation upward of the dollar, and two days later Doug Anthony announced that it would be coming down, not up, and 'if that dollar was not going to come down, then the government would come down.' So, of course, within nine days the dollar came down.

So, the first act of the Country Party, when they had power, was to assert themselves over the issue of the value of the dollar, and the last act before the Country Party went out of existence was on the issue of the dollar. Now, I am not aware of a single statement by a single National Party member in this House on the value of the dollar at all. I remember vividly when Doug Anthony called that coup. I was selling a big mob of cattle that year and I got 25 per cent more for my cattle that year—so I love that man.

Let me turn specifically to the issue before the House. We are going around clapping our hands and saying, 'How wonderful!' It was 32.5 per cent; now it is only 30 per cent. Mr Deputy Speaker, do you realise how completely stupid and hypocritical one sounds? My chief of staff read that out from the speech of one of the National Party senators, and I burst out laughing. Do you really think it is an achievement? You are going to hit us with 32 per cent—we were on 19½ per cent—but now you are going to hit us with 30 per cent. Oh, what a great victory!

She said it to me as a joke, with a sense of humour. I must admit that I burst out laughing when she said that to me.

What is not funny is to be pulled up by people late at night at the Hughenden hotel. The owners of the two hotels in Hughenden work extremely hard. In these little towns they are desperate for labour all the time. They are desperate to get people to work in their hotels. One of the owners really razzed me on this issue. She said, 'We just simply can't get people to come out here and work.' Whatever the reasons may be, that is the reality. My wife's relative has a cattle station and almost all of the workers on that cattle station are backpackers. It is a big station, and it is right out in the middle of nowhere. Backpackers have a lot of the fun there, and they bring a lot of enrichment to the local community. I do not know how she could run her cattle station without these people. I often stay at the Barron Valley Hotel in Atherton. I think some 90 backpackers also stay there. Again, there are something like 60 or 70 employees in that hotel. If the backpackers go, we lose 60 or 70 jobs in a tiny little town like Atherton.

I have great respect for the member for Dawson, but, all the same, I question the fact that people will employ a backpacker before they will employ a local. I think every time you want a local person, who is there all the time, you would as a general rule employ a local over a backpacker. I have to say to the House that, when I was drinking at a hotel in Tully, I said to these blokes, 'What do you do?' They said, 'We're banana workers.' I said, 'Well, it's Tuesday and you're not working.' They both said, 'No, we don't work on Tuesdays.' I said, 'Righto.' They said, 'Yes, some Thursdays we don't work, and on Mondays, too, we don't work.' You get that sort of approach. While people condemn the backpackers, our local backpackers, we have bananas in our supermarkets because of these blokes. Even if they are not the hardest working blokes and they have a bit of fun, I cannot really condemn them.

But there is a very serious issue here, and that is that, if you have a wife and three kids, you would be better off on welfare than working. So, while the member for Dawson quite rightly pointed out that a lot of people do not work, there is a disincentive for them to do so because of the way the welfare system works. If you have a wife and three kids and you are on 50 grand a year, you will pay virtually the same tax as a person who has no wife and no kids. The disparity in the tax rates in Australia is appalling. In the days of the old Labor governments, there was a belief in fairness. If you have a family of five and you are on 50 grand a year, you should not be paying much tax. If you are on 50 grand a year and you have no family then you should be paying more tax than the person who has to look after four other people.

I think there are two great problems in Australia today: the complete lack of respect for motherhood and the spiritual values in the country—and they are reflected in the Tax Act and come out in neon lights in this particular issue. Many times hardworking people in the banana industry people, whom I represent, come up to me and say, 'Mate, we'd make more money off welfare if we didn't work.' I often ask them: 'Why do you work then? They say: 'You've got a responsibility to work. You can't just be a bludger.' This is a very good sentiment.

There is another issue here. I am one of the two representatives of the Far North Queensland tourism industry. There is the Gold Coast and Far North Queensland, the greater Cairns region, if you like, and to a lesser extent the Mackay-Airlie Beach area. They are the two great tourist destinations. When I say 'tourist destinations', there are people who come from overseas who like to visit capital cities. Everyone on earth does that, right? But why do they decide to come here? It is because we have magnificent beaches on the Gold Coast and we also have the Great Barrier Reef and the jungles of North Queensland. This is why they come here. The great tourist mecca of Australia, outside the Gold Coast, is Far North Queensland. When I used to go to a hotel in Far North Queensland, I would regularly see people like Lee Marvin and Bo Derek at that hotel. Tourism attracts the most important, prominent people in the world.

You will not have a tourism industry if you take away the backpackers. One quarter of the Far North Queensland tourism industry is in fact the backpackers—and you have taken away their incentive to come here. Their wages, their incomes, have been cut by a third, and you are saying that will have no effect. Of course it will have an effect. My own children are fond of going overseas to work for a year or something of that nature, and they like to work out how much money they will make. The fact is that they are not going to be making much money at all if they are paying a third of it to the government. That is not the case in other countries. In fact, in this countries they were paying virtually no tax at all, although I think it is a government's responsibility to take some tax off them.

We, the people of non-metropolitan Australia, watched the wool industry being completely destroyed. Australia's biggest export earning industry was destroyed by deregulation—by stupid policies in this place. We then proceeded to watch the sugar industry being destroyed by deregulation and a decision not to go to ethanol. We cannot compete against Brazil, the big boys, in the sugar exporting market because they have ethanol; we do not. They cross-subsidise it.

I represent the tobacco industry. Tobacco is naughty, yes. Well, we all know that. A town in Victoria had 3½ thousand people employed in the tobacco industry. The people of Mareeba had 2,000 jobs. That was completely destroyed by deregulation—nothing to do with people not smoking. There is the prawn and fish farming industry. I regret to say that it was the National Party that deregulated the sugar industry in this place. It was the National Party that deregulated the tobacco industry. They held the portfolio. It was not the National Party in the prawn and fish farming industry; it was the Liberal Party that introduced restrictive environmental laws that completely destroyed that industry. It went from $750 million a year at one stage to about $27 million a year. It was the National Party in this place that destroyed the dairy industry through deregulation. And it is not good enough for the National Party to come into this place and skite that they had $140,000 for every farmer. That was one year's income you got for them, and the poor beggars were put to the sword. Seven thousand of them vanished without trace. In my own area, there were 240 and there were 36 the last time I looked. It was one of the most intense areas in Australia. I was speaking to a person in Victoria the other day who had over 320 and now has three. It has completely destroyed an entire industry. What for? To make Woolworths and Coles rich! We are getting less money and consumers are paying the same. Actually, consumers are paying a bit more. Forget about one single line. Coles have made a welter out of—over our dead bodies, I might add—the dairy industry. Without ethanol, sugar cannot compete. There is a 23 per cent benefit in sugar cane if it goes to an ethanol stream—cross-subsidised across to the sugar stream. In grains it is exactly the same—a 13 per cent benefit. (Time expired)

Damian Drum (Murray, National Party) Share this | Link to this | Hansard source

This is an incredibly important debate for the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016. This issue first raised its head in the Murray electorate during the campaign of the last election. Once it was out there in the public, it certainly raised an awful lot of interest by the horticulturalists of the Goulburn Valley. I was able to meet with a large number of the horticulturalists in the Goulburn Valley and it certainly did not take long for the impact and the consequences of this issue to be put front and centre. So it certainly was with a large degree of relief, and with a fair amount of badgering, that we were able to announce two weeks ago that the coalition had found a solution to the issue—that was going to be fair to everyday Australians who also work in some of these fields—to see people coming from overseas and paying a degree of tax. It was also going to be fair in relation to the amount of tax that we were going to ask these overseas workers to pay when they come here. Obviously, the issue was so important because of the critical nature of this labour force. We certainly did not want to even countenance the idea that we would go too hard with our tax percentage that we would scare the overseas labour force away, because the consequences of that result would have been substantial.

Before I talk about where we have landed, I would like to acknowledge the way in which we went about the review. Firstly, it was the National's leader, Barnaby Joyce, in concert with Treasury, who was able to give the industry a six-month delay on the implementation of the reform and pushed the implementation out to 1 January 2017 with the rider that, by the time that date came around, we would have found a solution for the backpacker tax that we could all live with, and that would be a positive outcome for everybody. We put in place a program and a process that was going to arrive at a sustainable level of tax so that the industry could go forward with some security, and that was with a full-blown review under Luke Hartsuyker. His work in the full-blown review into this issue was initially set to report in mid-October. Once the consultation process was under way it became abundantly clear that one of the great issues about the backpacker tax was the timeliness of it and the urgency of reaching a resolution. The evidence came to the inquiry.

Apart from finding a percentage that the backpackers could live with and the Australian government could live with, with the impost on the roads and the amenities that our foreign workforce friends enjoy, there was the need to find a point they could accept so that they would keep coming back. The inquiry was to report back to the government in mid-October this year. As I said earlier, it was with fantastic relief that we were able to bring that process forward by around three weeks because the evidence was so clear. As I said, one of the most important things with this issue is the time-critical nature of the entire resolution that is needed. In late September, we were able to announce that, with all of the conversations and consultation with the horticulture industry, backpackers, supply agencies and labour agencies, we were able to land on 19c. As many people would know, a large portion of backpackers are not all that concerned. They are young by nature and they are not all that concerned with their superannuation. Quite a large proportion of them leave that super here in Australia anyway.

I understand that it is a 95 per cent impost on superannuation that is earned, but, again, it lets all of the backpackers know exactly where they stand with this issue into the future. Indications are that, providing we arrive at this resolution early enough, then we were going to put confidence back into this labour force. They are overseas right now making their decisions about which country they are going to visit so that they can enjoy this trip of a lifetime, work for the first six months or so to get that additional time on their visa and then have the experience of a lifetime. All of this workforce that are going to be here in the next few months are overseas right now having conversations with their friends about which country they are going to go to. The 19c was a good reflection on the value of the wages that are available here in Australia and the quality of life that you are going to be able to experience by coming over here with not much money, earning a $10,000 or $15,000 or $20,000 nest egg and then, as most backpackers invariably do, dropping that money somewhere else in Australia. That is the critical nature that we need to understand about how this money is filtered and shared around Australia.

We were able to resolve this in late September and bring it into the parliament in the lower house last week, but now we understand that it is being held up in the Senate because Labor, the Greens and the crossbenchers want to have a review into the backpacker tax arrangements. Mr Fitzgibbon mentioned this morning that he was more or less accepting that he would make sure this work is done by Christmas. A statement as straightforward as 'We'll have this done by Christmas' shows a clear understanding of the time-critical nature of this issue. Backpackers do not just decide where they are going to go one day and book their flights and turn up two days later. They take months to plan their entire trip. They take months to research the best areas to work and enjoy themselves and where else they are going to travel after they finish their work to look at some of the other great parts of this country. But that planning process takes months. We are already being clearly warned by the horticulturalists in the Goulburn Valley and elsewhere that we do not want to muck around with this issue, that we need to make these decisions quickly.

The coalition has done that. We have upheld our end of the bargain to resolve this issue quickly. What we are now faced with is the consequences of Labor and the Greens and the crossbench wanting to play games and do some chest beating in the Senate. I am all for politicians that want to play games and increase their notoriety and have everybody look at them and see how important they are—I am happy for you to do all that stuff, but do not do it when you are going to impact on all the mums and dads businesses around Australia. In the Goulburn Valley you are going to be impacting in a negative way some of the biggest industries that we have in the entire Goulburn Valley.

It is not just the horticultural industry. They are going to be the first to be hit if these backpackers choose to go elsewhere because of the uncertainty about what the Labor Party and the Greens are doing in the Senate. But there are so many other industries that are hanging right off the back end of the horticultural industry, such as the food processing plants. SPC, one of Australia's iconic industries, has well over 500 people employed. They will be directly impacted by any downturn in the backpacker labour force turning up. Then, moving past the processors, you then move into the transport industry and the packaging industry, all of whom are setting up real hubs and gigantic companies and businesses in the Goulburn Valley, which, again, are all riding on the back end of the fruit and horticultural industries. Once you move away from that, you then go into the retail aspects of the fruit industry. It is a matter of understanding that this is critical and if we get it wrong there will be severe consequences. It is not just the fruit—it goes right through the entire community.

The consequences of gamesmanship on this issue are going to be severe. In the Goulburn Valley we have over 10,000 backpackers that are there for anywhere from around three to six months. Some of them stay longer. However, it is a significant workforce that plays a significant role in the fruit industry. They have not been paying zero tax. There has been an agreement in place which has probably been acting as a withholding tax. Historically the fruit pickers that come in from overseas pay 13c and have been paying 13c in the dollar for many, many years. An agreement was reached—I think the shearers were also brought into that agreement and into that accord. So the backpackers in the Goulburn Valley region have already been paying 13c in the dollar, and that has been an accepted amount to be paid by our overseas workforce. It has been understood that an extra six per cent is not going to be substantial enough to have them veer away to another country, simply because of the better wages that are on tap in Australia and also the better quality of life and better amenities that are provided by the relevant tiers of government here in Australia.

So my plea, very, very clearly, is that the government has done its part. What we need to do is put the message out there very clearly to the Senate that this is time critical and there are going to be an awful lot of mum-and-dad Australian businesses that are going to be impacted if these games continue any longer than another week. We are going to need to send a very clear message overseas, and there is a $10 million package for advertising in the tourism sector of the countries that generally provide this workforce. We need to send the message loud and clear that Australia is open to the backpackers, that we are welcoming backpackers and that we have set a 19c in the dollar tax rate. Most backpackers, when they sit down and do their sums with their friends in their planning for their upcoming trip, are going to see Australia a fantastic opportunity and a great destination.

The other aspect of this which was not also taken into account is the impact this is going to have on the tourism sector in two ways. Firstly, there is a large percentage of tourist operators that use backpackers as part of their business in the same way that the horticulture industry, the viticulture industry and even dairy industry do. Secondly, of the money that is earned in agriculture by the backpackers, nearly 100 per cent of that money is turned around and dropped here in Australia at other tourist ventures right around the country. So there is going to be an enormous impact felt not only in horticulture but also in tourism if these backpackers are deterred from coming to Australia because of some games that people want to play in the Senate.

Sometimes I look at this place and say, 'Yes, sure enough, if the Labor Party want to play games, well, good on them. If the Greens want to sit with them and play games, that is fine.' But in the Senate there are enough Independents and crossbenchers apart from the Greens and Labor to all get on board together and make the Labor Party and the Greens irrelevant. It adds further fuel to the bewilderment of the Senate when those minor parties cannot see the common sense with where we have landed on this one and cannot see the time-critical nature of creating a resolution that is going to let everybody go forward.

Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

I rise to support the amendment moved by the member for McMahon because this has been a shambolic process from the outset. When the budget was handed down last year, there was a change to this particular arrangement. There was a proposed tax imposition on working holiday makers and there had been very little consultation with stakeholders. So it was 18 months in the making in which time the government could not resolve this matter. As a result of that 18 months of bungling, division, dysfunction and dithering by the government, stakeholders—in the first case employers who rely upon legitimate demands for labour in regions and in certain sectors of this country—were left with this matter unresolved. There was no proper consultation, no consultation with the employers or with the sector generally and, as a result, there have been 18 months of delay, confusion and uncertainty for those stakeholders. For those reasons I support the first paragraph of the amendment, which says the government's handling of the backpacker tax has been a shambles. It has created uncertainty within the agriculture and tourism sectors and within other sectors which rely upon legitimate demands for labour in this manner.

Having spoken to employers in the agricultural sector most recently, they have emphasised how disappointed they have been and how angry they have been that they have been let down by the government. Quite frankly, even though it would appear that the National Farmers' Federation has supported the compromise position proposed by the government contained within this bill, that is not the view of their members or at least many of its members, who have raised concerns that the uncertainty has already had an effect upon the supply of legitimate labour in sectors such as agriculture. As a result, they will not be able to find labour in areas in which they have had difficulties in the past. Again, this is not a particularly suitable and satisfactory compromise for many after 18 months of delay and confusion.

It is also important to note, and the member for McMahon notes it in his amendment, that the passenger movement charge increase was proposed despite the government, only weeks before, criticising an increase to the passenger movement charge when we on this side were last in office. The now trade minister attacked the change by saying it would be strangling the golden goose to impose a new tax on passenger movement. It will have an adverse impact upon the tourist industry, particularly for those very low-cost flights to countries within the region. Any increase is going to have some deterrence. The fact that the government so hypocritically attacked Labor and then only weeks later proposed an increase to this tax is quite astounding but it really shows how confused the government is. Within almost the same time frame, you have one minister coming out and attacking Labor for an earlier increase and then the Treasurer is now proposing an increase without any regard to the trade minister's comments—a government confused, contradictory and divided.

Finally, the fourth paragraph refers to concerns that have been expressed about the changes to the arrangements for working holiday makers given the rorting, abuse and exploitation that have occurred. I believe there is a legitimate demand for temporary work visa applicants in parts of our labour market. Some sectors of our economy certainly require a supply of labour to do the job and that has been the case for many a year. Equally though, we have seen situations where either there has been some widespread exploitation of work temporary work visa holders and there has been a flood of temporary work visa holders in areas where there is no legitimate demand and that is an important issue too. As a former immigration minister, I for one do support the legitimate supply and complementary embellishment of our labour force through temporary work visas including the student visa, holiday maker visa and the 457 visa.

However, there is sufficient evidence to substantiate the contention that there is an oversupply in some sectors of our economy, which is leading to the displacement of Australian jobseekers getting work. Young jobseekers in particular are not always afforded the opportunity of employment in their own communities, because of the overabundance of temporary work visas. For that reason, while I think it is not an easy matter to resolve, Labor committed to examining the manner in which both the working holiday maker visa and the student visa apply so that we calibrate the implementation of these visas with a view to making sure that we do supply the legitimate demand that is required for employers and making sure that we do not oversupply in some local labour markets that will only lead to the deprivation of employment opportunities for jobseekers in this country.

We are getting to a point where temporary worker visa holders make up 10 per cent of our labour market. This country is built on immigration. We have a bipartisan position in relation to permanent immigration and have had for some time. About two-thirds of permanent migrants have come here through the skilled stream and one-third for family reunion. Despite the fraught debates we have had sometimes on the topic of immigration, the permanent stream of migration is the one area that we have had agreed about over the last 20 or so years. It has fluctuated somewhat, depending on the growth of the economy and the demand. During the Howard years we saw very big increases in permanent migration because of the mining boom. Labor supported that approach. that is one area where we tend to agree.

One significant distinction between the parties is that we have had concerns about abuse of the 457 visas, which is why in 2013 we changed the law to bring in labour market testing. We do have a concern about the misuse and in some significant instances the overuse of temporary work visas such as the holiday maker visa and student visa where very are only driving wages down because there is exploitation, and because there is an oversupply and local job seekers are not being given an opportunity. We do not like to see any form of exploitation; nor should this parliament. We do not want to see temporary work visa applicants being exploited. We do not want to see local job seekers exploited to the extent that they are not being afforded opportunities to find work because of the misuse and overuse of these types of visas.

With respect to the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016, the amendment that has been moved by the member for McMahon expresses concerns about some of the changes. That is why we would like to see the bill examined. The one way to undermine confidence in either temporary or permanent immigration is to have the system not work. Therefore, if there are problems with the system it is very important that they be fixed. It is very important we get the system right so that we can instil confidence in the migration system and in the use of temporary migration for employment and other purposes.

In keeping with that, the Fair Work Ombudsman only last weekend released its report Inquiry into the wages and conditions of people working under the 417 working holiday visa program. This is a damning report that really confirms the scale, nature and extent of exploitation of many temporary work visa holders working in this country.

The first thing to note is that since 2014 'a total 410,503 people have been granted the right to work in Australia courtesy of the subclass 417 working holiday visa'. It says that 'in the 2015-16 financial year, the Fair Work Ombudsman received 1,820 requests for assistance from visa holders and was responsible for just over $3 million being recovered', and that 'in total, 44 per cent of visa holders who lodged a request for assistance with the Fair Work Ombudsman were on a 417 visa'. It continues:

In the same period, 76% of litigations—

more than three-quarters—

filed by the FWO involved visa holder workers and more than one third of all of the FWO’s enforcement outcomes involved a visa holder. Significantly, half of these enforcement outcomes (that is, the issuing of compliance notices, the execution of enforceable undertakings and the filing of legal proceedings) involved 417 visa holders.

That is a very damning set of statistics. It says that there is something seriously wrong with the application of this visa class. The 417 visa was expanded over a decade ago. We need now to take stock and consider the way in which the 417 visa is being used.

The Fair Work Ombudsman report says:

The FWO regards 417 visa workers as especially vulnerable due to the difficulties in understanding and exercising their entitlements because of age and language barriers. In particular, their vulnerability is increased if they choose to undertake an 88 day placement, because of the remoteness of their working location and their dependence on employers to obtain eligibility for a second year visa.

The Fair Work Ombudsman has identified issues in relation to this matter:

In addition to examining the requests for assistance, throughout the course of this Inquiry, the FWO received information from visa holders, stakeholders and the public identifying a range of concerns suggesting exploitation of 417 visa holders, including instances of:

that is, effectively, bribing an employer to give them a second year—

That is a list—and not an exhaustive one—of the complaints that have been raised with the ombudsman which have led to, in many instances, successful litigation. But the scale of these problems is of great concern to Labor. It is why this visa must be examined. It is why the member for McMahon has expressed concerns about those changes to arrangements—so we are clear as to whether in fact they are going to improve things or not.

We do not want to see exploitation and abuse. That will lead, as I say, in the first instance to exploitation of workers, many of whom are vulnerable, as the Fair Work Ombudsman has already said. Secondly, that will place downward pressure on wages so that locals looking for jobs, too, will be exploited either by, in cases where the visa is being overused, being deprived of employment opportunities or because wages will be lower because employers are not paying the legally required rates of pay. These are serious matters that need to be attended to.

The Fair Work Ombudsman, the government's own agency, only this week has outlined, chapter and verse, a significant problem with the working holiday visa program that needs to be attended to so we can have confidence in the system. It is something that the Minister for Employment must attend to as a matter of course as soon as possible.

It is not just that issue, of course. As I have said, for 18 months the stakeholders have been concerned about the problems that have arisen as a result of the unilateral proposal to impose tax on temporary work visas without any consultation or proper information provided to affected parties. It has led to this uncertainty.

Labor will examine these matters. We are keeping an open mind. We will examine them and look at the findings and recommendations of the Senate inquiry. But I think we should be very clear here that we need to make sure we get the legitimate demand right so that our employers and industries are able to find sufficient labour. But we also need to ensure that the system does not allow for exploitation and the deprivation of employment opportunities for local jobseekers.

Tony Pasin (Barker, Liberal Party) Share this | Link to this | Hansard source

It is true to say that for some time now in our nation we have had difficulties around the policy settings relevant to 417 visa holders—or backpackers, as they have become known. They are working holiday-makers. I thought I might distil down for the parliament's benefit why we are having those difficulties on those settings. There is a very easy, binary opportunity to seek to blame one side or the other. But these issues dive much deeper than an exercise in binary blame shifting.

First of all, I think we should note that the number of visa applications coming to Australia has been in steep decline since 2012. In 2012 those opposite sat on this side, and those on this side sat opposite. We have also seen a practice that has developed whereby working holiday-makers certify that they are Australian citizens for the purpose of income taxation. That is not right and not appropriate, but it is a practice that has built up. Why is that important? It is important because foreigners who work in Australia are obliged to pay tax of 32½ per cent. If you are Australian for the purposes of the Australian taxation system then you do not pay tax at a flat rate of 32½ per cent and you can take advantage of things such as the tax-free threshold. Therefore, there has been a practice that has developed that has meant not only have we seen a drop-off in the number of backpackers coming to Australia but backpackers have not been paying the appropriate level of taxation. Even today, that is 32½ per cent. When the tax-free threshold was lifted from $6,000 and more than tripled to exceed $19,000, this operated as a windfall to 417 visa holders in the country. It meant for very many of them that they could come to Australia on a working holiday visa and pay no tax. That was never the intention.

If we fast forward to the 2015 budget, there was then a need to correct this anomaly—that is, the anomaly that saw backpackers certifying themselves as Australians for the purposes of the Australian tax law, taking advantage of the tax-free threshold. So instead of paying 32½ per cent in tax, which the law said they were obliged to, they were in fact paying no tax or at least no tax up to the point of the tax-free threshold. In the budget of 2015 was an attempt to legislate the current position with respect to the law.

I have said that this has been a difficult road, because it has. As soon as I and my constituency were aware of this issue I began of the work to see it undone. Why might I do that? My electorate is 64,000 square kilometres in size. It is very much in the top echelon of electorates in this place in the growing of horticultural products and, indeed, I would argue, agriculture more broadly. So there is a specific and strong demand for seasonal workers in periods of peak demand at various times throughout my electorate.

I would like to pause at this point to say: isn't it great that we are having a discussion in this place about the need to supply labour in peak periods of demand? It speaks to the strength of the agriculture and horticulture industries in this country. I am much happier having a debate in this context than in the context of communities suffering from the effects of a downturn in commodity prices and a lack of jobs.

I should also note that I see this as a debate of immediacy. It is a debate for today, the short term and the medium term. I think both of us—that is, those who sit on both sides of this place—would like to see more and more Australians taking up these jobs. That is the long-term objective: to take people from welfare and put them into work and put them into positions where they can take up this temporary work. Whilst in any one particular location this work can be temporary, collectively it can amount to effectively full-time work around the country. Indeed, my electorate is littered with stories of people who began their business as employees in a temporary setting, moved to communities and over time worked up to a point where they not only are working in that capacity but have acquired businesses and have developed them.

We got to a situation in 2015 where the government effectively legislated the position of the day. That was to come into effect in the middle of this year. In the lead-up to the federal election, we obviously indicated that there was more work to be done on this policy. At this point, I think it appropriate to thank the current Treasurer, the Hon. Scott Morrison, for his efforts in relation to this matter. The member for Hinkler is smiling. I can tell the member for Hinkler, as he well knows, in his absence in the Liberal party room, that one short, fat little member for Barker got up and said, 'This just was not going to fly,' after we had resolved the superannuation debate.

Myself, the member for Durack and the member for Grey then met with the Prime Minister later that week and indicated that this matter needed to be resolved. I was part of that delegation in my role as chair of the backbench committee for agriculture, Ms Price was part of it on behalf of Northern Australia and the member for Grey was there in his capacity as chair of the Liberal Party rural and regional caucus. As a result of that meeting, we saw a number of discussions take place over the intervening two weeks. What we have seen is a significant change to our position.

At this point, so that the member for Hinkler does not get too upset with me, I will say that these voices were lending weight to voices from deep within the National Party room. That is why we are such a strong party. As somebody who came here as something other than the coalitionist, I am glad to say I am now a coalitionist, because I see what we can achieve. We all have our strengths and weaknesses, but I think it is fair to say that this is one issue where the Liberal Party room had a lot to say about what needed to happen.

So then, what have we done? We taken the effective tax rate, which I should say operates today—this is something that I think is lost on the member for Hunter; the current operating tax rate is 32½ per cent—and we have taken it to 19 per cent. We have provided $10 million to Tourism Australia to seek to address the fundamental causative concern here, which is that the number of backpacker visa applications has been in steep decline since 2012. That $10 million for Tourism Australia to arrest that decline is, quite frankly, a sensible approach. We have reduced the application fee for working holiday-makers by $50 and we have raised the age of eligibility to 35. That is to say nothing of the one employer rule, which we have tweaked significantly to mean that you could work for a single employer for 12 months, or up to 12 months, provided you undertake that work in two separate locations. These are all measures that go towards providing an additional supply of backpacker labour into the Australian marketplace. Why, you might say, is that important for my electorate? Well, as I said earlier, we are such significant producers of agricultural and horticultural products.

Now, there are those opposite who have attempted to play a little politics with this. They say that it took the Liberal-National Party some time to resolve this issue and, true, it did. But the problem for the member for Hunter is that he has been in this place all that time too and, instead of coming to us and coming to the minister with a proposal, all we see is the member for Hunter whingeing and whining about the performance of the Deputy Prime Minister. It is not helpful, with respect.

The National Farmers' Federation know what is going on. On 27 September, after they saw the release of our position, they said:

Farmers breathe sigh of relief at Backpacker Tax decision.

If it was not clear enough about how the National Farmers' Federation and their members think about those opposite—

Ms Chesters interjecting—

The member for Bendigo best be careful, because I might remind the House about the ban of the live export trade. On 11 October 2016, the National Farmers' Federation said:

Labor abandons farm sector on backpacker tax.

Why do they say that Labor has abandoned backpackers? They have abandoned backpackers, and we have made the decision. We do not make the decision—once we had come to a positive policy outcome—to delay it and wait for it to come to this House, play politics and send it off to a committee. We socialised it immediately. We called meetings of the backbench committee for agriculture by telephone conference. There was an extraordinary cabinet meeting to approve it. We understand the need to get this position socialised in plenty of time to ensure that backpackers continue to come to Australia.

Sadly, those opposite do not. Indeed, no-one inside or outside this place has known what the Labor Party position on the backpacker tax has been—no-one. We did not know whether they were supportive of the change; we did not know if they wanted other changes. One thing we did know—and this is what is a bit cute about the position they are adopting now, standing in this place and criticising those opposite whilst at the same time telling us that they will ultimately support this bill—is that the $540 million these changes will create has been banked by those opposite in the lead-up to the July 2016 election. They took those funds and expended them as part of their costings.

The final thing I want to reflect on is that there are two voices that are no longer in this place who were the strongest advocates as we began the campaign to change the backpacker tax in 2015 building through 2016. They were the former member for Braddon and the former for Lyons. Those two gentlemen were fierce advocates for their communities and fierce advocates for Tasmanian growers. What we have had from the new member for Braddon and the new member for Lyons is deafly silence on this issue. Indeed, the new member for Lyons, in a radio interview, indicated that he did not think the Labor Party would support these changes. I expect his position has changed now that someone has told him that from the very get-go the Labor Party was banking these savings and spending this revenue.

These changes are emphatically good news for agriculturalists and horticulturalists in Barker. Whether you are a producer of seed potatoes in the south-east of South Australia, a stone fruit grower in the Riverland, a vigneron in the Coonawarra or you are running a broadacre property through the Murray and Mallee, these changes make it more likely that you will have the necessary backpacker labour at periods of high demand.

This is a government doing the right thing. We went to the election and we were told clearly that we need to effect changes to the proposed policy. We proved that we have something other than a tin ear on this issue. We have proved it on superannuation and we have proved it now on the backpacker tax. I commend the bill to the House.

Lisa Chesters (Bendigo, Australian Labor Party) Share this | Link to this | Hansard source

'Debacle' is the only word you can use to describe the government's performance on this issue. Let us just remember that it was their tax that they introduced in the 2015 budget. It was their decision to tax backpackers 32.5 per cent for every dollar that they earned. That was their decision and it was instantly unpopular with their constituency and it was also instantly unpopular—and this might shock the coalition—with our unions. They were not happy that we had decided to adopt that position, because they argued that it was an issue of fairness. So perhaps the government might want to check the submissions from the unions about what they argued in relation to the 32.5 per cent. The government went for a quick tax grab. It went through the parliament and it has been sitting there. Since then, with the war within the coalition, they have not been able to resolve this issue until just recently. Yet they seek to blame everybody but themselves for their unhappy marriage and their inability to resolve this issue.

The bill before us, the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016, drops the tax to 19 per cent. But it is still a tax. Let's not pretend that it is not. You are still taxing backpackers 19 per cent. Some of the language and the rhetoric in media suggest that it has almost dropped off entirely. That is not true; it is still 19 per cent. That is less than the 32.5 per cent, but it is still 19 per cent. And you have to ask: why 19 per cent? Why is it 19 per cent? That is one of the reasons that this side is referring the bill to a committee. It is such a random figure. There is no other tax rate of 19 per cent. Yes, they have put it out there in terms of economics, but you cannot trust this government when it comes to economics. This needs to be tested.

What we have seen, on cue and as expected, from government members is a lot of alarmism. They are blaming the introduction of their own tax as the reason that the number of backpackers is dropping off. They are saying that their own tax is the reason that fewer backpackers are coming here. That is a really simple proposition that they have put forward, but they are not acknowledging that it is their own fault if that is the sole reason that backpacker numbers are dropping. The truth is that there are other reasons that the numbers are dropping. Another reason that this bill needs to go to a Senate inquiry is that we need to look at some of those other reasons. We need to really explore why it is that the other parts of this package have been put forward.

I am not surprised that members opposite are not referring to the Fair Work Ombudsman report that was released over the weekend. It was a pretty damning report of the backpacker visa, the 417 visas and the 462 visas. This report found that a third of the backpackers that they surveyed are being underpaid. Perhaps the reason that backpacker numbers are dropping is that they are being exploited—something that the government is choosing to ignore. The government is running away from genuine significant reform on the exploitation of backpackers in our country. I am not surprised but I am disappointed that the government is not acknowledging that this could be a reason that backpacker numbers are dropping off.

Farm work is hard work. There is no denying that farm work is very hard work. It is regional; it is remote; and it is hard to get to. And our farmers are in competition with so many other industries when it comes to backpacker labour. Something that the government are also not acknowledging in this debate is that, whilst we have about 200,000 backpackers in this country at the moment, only about 38,000 of them ever step foot on a farm. So, for all of their ranting—'We need to push through with this right now to get the harvest off the trees'; 'We need to push through with this right now because this is vital labour working on our farms'—what they are not acknowledging is that it is also about the 160,000 backpackers who will never step foot on a farm.

What they are not acknowledging is that, with the backpacker visa, you can work anywhere in our country. It is uncapped. They are directly competing against young jobseekers. I will just give some examples of where some of these backpackers are working. They are working in mining, they are working in construction and they are working in beauty. They are even working as social workers. You would think that having backpackers working as social workers was a bad policy direction. We are talking about social workers who deal with some of our most vulnerable children, foster children. We have backpackers working as social workers!

It is so important in this debate that we acknowledge the original intent of the backpacker visa. In 1975 the working holiday visa was introduced by the Australian government as a cultural exchange program. It was an opportunity to foster closer cultural ties with other countries, so young Australians could go over there and their young people could come here. In 2005, under the Howard government, a new option was introduced allowing 417 visa holders a chance to stay for a second year. This is when we saw the backpacker visa become a labour supply visa. The government back then created some significant problems, and we are seeing the repercussions of that a decade on.

The Fair Work Ombudsman's report that was released on the weekend exposed that the fact that you have to perform those 88 days to get a second visa has created a culture of exploitation. Today the backpacker visa is becoming a cultural exchange of exploitation. That is what came out in the report released on the weekend. A third of backpackers are not being paid their correct entitlements. We are not talking about a handful of backpackers here; we are talking about a third of the backpackers they had surveyed. We are talking about people having to pay for the opportunity to work 88 days to get their visa extended. Let us just explore and expose the sham that this visa has become. The government does not want to talk about this. It only wants a bandaid solution—'Let's just fix the tax. That will turn backpacker numbers around.'

They are kidding themselves if they think that by lowering the tax rate they will fix our international reputation. Other countries are upset that their young people are being exploited by Australian businesses. It was evident in the Fair Work Ombudsman's report. They spoke to consuls here in Australia. The treatment of their young nationals in our country by Australian employers and Australian industry has been raised time and time again. The report found—and the government has not acknowledged this—not only that a third claimed they were paid less than the minimum rate but also that they were forced to work excessive hours, were being sexually abused and were working and living in unsafe conditions. The report goes into detail how some employers deducted from workers' pay without even asking their permission. It goes into detail about how workers were forced to stay in substandard living arrangements and then have that taken out of their pay.

There is an ugly underbelly when it comes to this visa, yet the government does not want to talk about that in its package of reforms. It is really frustrating that the only thing we really have to debate today is the tax measure. What is not before us that the government should be focusing on is cleaning up this visa. Instead of introducing measures to clean up the seedy underbelly and the exploitation associated with this visa, the government wants to expand the eligibility up to 35. But young Australians cannot go and work in the UK up until they are 35. Young Australians cannot go to Canada and work up until they are 35. The original intent of this was a cultural exchange. What impact will expanding the eligibility up to 35 have on our jobs market? This is the question that needs to be asked.

Then there is working for the same employer in two locations. How will that help our ag industry, which the government cares so much about? What it really means is that employers in hospitality, employers in construction and employers in mining—the bigger firms out there—will simply move backpackers around, making it even harder for the agricultural industry to attract the workers they so desperately need.

The government is simply ignoring the fact that it is not just the tax which is why backpackers are choosing not to come to this country. Conditions in their own countries have improved. The treatment of backpackers in this country has to be a factor. The industry has to embrace reform. If you exploit backpackers and treat them appallingly, they will stop working here and they will stop taking up that cultural exchange, because who wants a cultural exchange of exploitation? I encourage members of the government to read this report and see the failings of their own minister to clean this up. The Minister for Employment and the minister for immigration are doing nothing to clean up the exploitation of vulnerable backpackers in our country.

One of the reasons why it is so hard for farmers to attract people to agriculture—and I reiterate that about 200,000 backpackers are in our country and AUSVEG identified that about 38,000 work on farms—is that they are in competition with a number of other industries, including meatworks. An example in my electorate saw local workers displaced. Don KR is a big employer, with 1,500 people. In the lead-up to Christmas local casuals get extra work to help them through the Christmas period. Castlemaine is a town of 6,000. Don KR used a labour hire firm with Taiwanese backpackers. We now know that they have been engaged in some of the practices exposed in the Fair Work Ombudsman's report. Basically, Don KR turned around and said that they were cheaper. They said it in the local media: 'They are cheaper than Australian workers, so we are going with the backpackers.' There were 200 jobs lost locally.

I am sure there is a farmer with some fruit who would rather have those 200 backpackers, but this is the competition they are in. The government has failed to do proper labour market testing, labour market analysis, about where backpackers are working. They are here ranting, with this huff and puff, about why we need to drop the tax to get backpackers in to pick fruit, when the majority of backpackers will never walk onto a farm. Backpackers are increasingly being used in construction and in mining.

We must acknowledge during this debate—and not one member across the chamber has—the unsafe workplaces in construction that some of our backpackers are working in. On my Facebook page, I have had the haunting image of the young German backpacker with her smiling face. She was here for a cultural exchange when, last Monday, she tragically lost her life. The 27-year-old backpacker fell down a 35-metre shaft to her death on a Perth construction site. She worked for a company that has underpaid workers and provided substandard working conditions. This happened on the back of two young Irish construction workers who were crushed and killed 12 months ago. One of the most dangerous places to be employed, it appears, is as a backpacker on a construction site or in the farm industry.

The government is not ensuring that the employers of these guest workers in our country have the proper health and safety procedures in place and in check. The intersection between labour hire and how employers are treating backpackers needs to be explored, which is why we have suggested that this bill go off to a Senate inquiry to be reviewed. There is a lot in the package that the minister is responsible for that we will not get the chance to debate, which is why it is necessary for it to go off to a Senate inquiry so that questions can be asked. The proposed tax rate of 19 per cent is an arbitrary figure. It is a bit rich of the government to stand here and say, 'Don't worry, we've balanced the books. It will all work out.' You cannot trust the government when it comes to economic figures. You cannot trust the government when it comes to economics. You also need to call them out on their ranting and raving that, if we do not do this right now, the harvest will not get picked. It is their own fault and of their own making. We need to explore the impact that backpacker labour is having on jobs in our industries. It needs to be called out for what it is. We need to ensure that every worker in this country—whether they are Australian or a backpacker, on a farm, in construction, at Don KR or at any number of places—are paid appropriate wages, are treated with respect and dignity and, quite frankly, can go home at the end of the day.

For the young German backpacker and the two Irish backpackers, and anyone else who has had a horrible experience through our backpacker visa program, the cultural exchange needs to end. This visa needs to get back to what it was originally intended to do: assist closer relations between two countries. It should not be used as a cheap source of labour for Australian industries to undercut the wages and jobs of Australian workers.

Andrew Hastie (Canning, Liberal Party) Share this | Link to this | Hansard source

It is always a pleasure to follow the member for Bendigo. The tenor of her speeches always has a sort of sour note. She talks a lot about the Chiko Roll, but I reckon she was raised on lemons.

Speaking of fruit, it is a great pleasure to speak today about the working holiday-maker reform package which our government is delivering. I am pleased to speak today on the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 because it is of great significance for my electorate of Canning and, indeed, the whole of Australia. The working holiday-makers reform package will provide certainty and stability for the horticultural, agricultural and tourism industries. The member for Bendigo cited the tragic death of a German backpacker just recently. I just want to say: we are talking about tax reform here. I am not sure if the results of the inquiry into that tragic incident have been released or even concluded, so let's not speculate and make erroneous links between government policy which is not yet enacted and that tragic example.

This is commonsense legislation and proof that this coalition government is committed to listening and responding to the concerns of the electorate. Through extensive stakeholder engagement, we have put together this policy, which both is equitable and will balance the range of interests involved. Earlier, the member for Barker spoke about his work alongside other backbench colleagues in the coalition. Alongside the member for Barker, the members for O'Connor, Durack and Forrest and Senator Chris Back all contributed a lot, as far as I am aware, to the development of this policy. I would also like to thank the Deputy Prime Minister and Minister for Agriculture and Water Resources and the Treasurer for listening and being open to the perspective of electorates like mine.

There are several key features to this bill, and foremost is the reduction in income tax to 19 per cent for working holiday-makers under the 417 and 462 visas. On this matter, we have listened to the concerns of producers and peak bodies such as the National Farmers' Federation. It is, of course, right and fair that visitors to this country should pay tax here like everyone else who works, given their use as well of public resources. But 32.5 per cent was simply too much and so an equitable rate had to be found that did not undercut our other arrangements. For instance, travellers from the Pacific Islands working under the Seasonal Worker Program pay tax at a flat rate of 15 per cent. A rate of 19 per cent does not undercut this arrangement but, nonetheless, remains generous by comparison to the original rate of 32.5 per cent. When our higher wage rates are taken into account, it is clear that this bill will make us competitive on the international stage for prospective holiday workers. We are, of course, competing with New Zealand, Canada, South America and other parts of the world, where young people from Europe particularly want to go and broaden their horizons before undertaking study or pursuing their vocations or careers. So we want to make Australia a place where they come, they have that cultural exchange and it is a positive experience, and they also have the opportunity to contribute to our economy and to our key industries in agriculture and horticulture and also earn a bit of money—which, of course, is spent in the communities where they live. I think of Capogreco Farms in Hamel, in Canning. They have 60 backpackers at any one time working for them. They produce a lot of fruit and have permanent housing facilities for the backpackers who travel. In fact, people in Italy and France know about them—word of mouth travels. It is a positive experience, particularly in Western Australia, for young European workers.

This bill will provide better protections and oversight for workers from overseas. By strengthening the tools available to the Fair Work Ombudsman, this government is working to protect backpackers and other potentially vulnerable working holiday-makers from exploitation. This government does not distinguish between nationalities. If you are a worker, you deserve the same protections as any other worker, so we are taking steps to protect workers.

Employers of working holiday-makers must register for their workers to receive the 19 per cent taxation rate. This will allow potential employees, young people from across the world who are planning their year ahead, to make informed decisions about where they go. There are a lot of places in Australia where you can work. So the register will help young people decide where they settle for their time in Australia and will also hold employers accountable. If they are on the register, they have to meet standards. They can only tax at the 19 per cent rate if they are on that register.

This legislation will also increase the desirability of Australia as a destination for working tourists. It does so by reducing the visa application charge for 417 and 462 visas from $440 to $490. That is a $50 saving. For most backpackers, being in their late teens or early 20s, $50 means a bit—a couple of beers or food for the week, or what have you. So I welcome that reduction in cost, as well. Expenses in the bill are offset by increasing the passenger movement charge by $5. We are also spending $10 million to promote Australia as a destination for working holiday-makers. These measures highlight the government's commitment to promoting Australia's working tourism brand in a way that is economically responsible.

The coalition has listened to the electorate and acted accordingly. We have consulted carefully and are moving as fast as possible to provide certainty and security to Australia's hardworking growers and their prospective employees or holiday workers. These decisions have been broadly welcomed by industry. The Labor Party, by contrast, seems unable to be happy with anything. I have listened to some of the opposition speeches on this bill—such as the one a few minutes ago from the member for Bendigo—and I have heard their complaints about the government's handling of this issue. What is their problem exactly? Is it that the issue has not been addressed quickly enough? Or is it that enough scrutiny has not been applied—that we have not consulted for long enough? We have heard all of those complaints.

A few months ago the opposition spokesman for agriculture was complaining that the question of the backpacker tax had not yet been resolved. Now that we have resolved it and have produced the legislation after consulting widely, and after creating a package that is broadly supported by industry, Labor now seek to delay the passage of this bill by punting it off to a Senate economics committee. They are slowing the process down. My fruitgrowers in Canning have said very clearly to me that they are concerned about a secure workforce. They are concerned about it now, not in six months. Because of the nature of the fruitgrowing business, you have to make projections; you have to plan into the future. So they need surety that they will be able to secure a workforce for when it comes time to pick fruit. It has to happen soon. So I implore those opposite to get on with the business and pass this bill.

It is important that we and the rest of the Australian people understand, though, what is going on here. Those opposite like to talk a big game. They talk about standing up for people, for workers, and about backing Australian manufacturers and, of course, the agricultural sector. Yet, all we are getting here is politicking—nothing more, nothing less. It is true to form. We have seen the Labor Party obstruct and mislead in recent weeks and months on the same-sex marriage plebiscite, on Medicare. They have a long history of this on renewable energy. Now, we are seeing them do the same thing for agriculture, horticulture and tourism. They go on about how the government is in a shambles over the backpackers tax, they get a few grabs in the media and they then sit on their hands. I am calling on you now to pass this bill—get on with it. This is a good reform. It gives security to our industries. Let us put politics aside. This place used to be renowned for the effectiveness of the two-party system. That two-party system made reform possible during the Keating and Hawke era. In the same spirit, this is one of these industry reforms that need to happen, and I call on you to back it.

This government is about delivering. This is about ensuring that Australia remains a competitive destination for the overseas labour market. Again, we are competing with other countries, like Canada and New Zealand, for these workers. It is an economic issue, and there are many factors that come to play. We need to get the balance right. As I have said, we have consulted widely and carefully, and this bill does address those concerns. However, this bill matters most because it affects real people. At stake are the crops and the fruit that need to be picked, which, otherwise, would be left to rot on the ground. At stake are agreements and contracts with buyers which could be lost in the future. At stake are the livelihoods and wellbeing of hardworking, everyday Australians who should not have to live according to the campaign timetable of a Labor Party that cannot accept it lost the election.

I would like to take the opportunity now to highlight how this issue has developed in my electorate and how this government's ministers have responded to the concerns of my people. I applaud the hard work and advocacy of the Hills Orchard Improvement Group, led by the very capable spokesman Brett DelSimone. Brett has persuasively put the case for the holiday-makers reform package. He has very competently represented the fruitgrowers of Roleystone, Karragullen, Pickering Brook and other suburbs in Canning. They are an excellent community group, and it has been a pleasure working with them on this reform.

There were two significant events in the lead-up to this bill. We had a fruitgrowers' forum for which the Cabinet Secretary, Senator Sinodinos, came to Canning in early May. It was hosted by John and Emily Della Franca. They own CORE Cider House in Canning. They are third-generation orchardists. It is a great facility. You can go there for a nice lunch and a bit of cider. You can sit there with a beautiful vista over their orchard. It is a great place. I highly recommend it. So we had a very good meeting with Senator Sinodinos. I remember one thing, though. One of the fruitgrowers said: 'We are competing with the welfare system when it comes to attracting workers and securing workers. We are competing with the welfare system.' So I am very glad that we have the Minister for Social Services and the Minister for Human Services working up a substantial reform package which, hopefully, will help fruitgrowers and people in the agricultural sector secure their workforces into the future. We need young Australians working, not on welfare. So I am very proud that the government is taking action in this area.

The second meeting was with the Minister for Immigration and Border Protection, who visited fruit growers during the campaign. He talked about the classification of suburbs in Canning that were previously metropolitan but are now regional, which also gives more security to employers who hire backpackers or working holiday makers. So there has been very good engagement from our ministry and very good engagement from my local community groups. This is how good public policy is formed. I want to applaud the people in Canning, and the government for the way they have delivered this package.

In closing, I commend this bill to the House. It is sensible reform designed to incentivise a secure workforce for our fruit growers; promote Australia as a desirable destination for working holiday makers; and, most importantly, ensure our agricultural, horticultural and tourism industries remain strong into the future.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

I call the member for Oxley, and I wish him all the very best in the 45th Parliament.

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

Thanks very much, Mr Deputy Speaker Vasta. I rise to enter the debate tonight on the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016. I am following the member for Canning, who finished his remarks by saying this piece of legislation was the definition of 'good public policy', in the Hawke and Keating tradition. Through you, Mr Deputy Speaker: the member for Canning is certainly no Bob Hawke and certainly no Paul Keating. And, if the member for Dawson threatening to quit, a meltdown inside the coalition party room and a reform taking 18 months to come onto the floor of this parliament is your definition of good public policy, we have a big problem ahead of us with this government, and I am not surprised it is in the mess it is in. But, from listening to the contributions from those opposite, particularly the members of the National Party, it seems that somehow they want to be congratulated for the mess that they have created! Somehow they want a pat on the back for the mess and uncertainty that they have delivered to their regional communities.

I support the second reading amendment moved by the shadow Treasurer and member for McMahon because this backpacker tax has been nothing more than a shambles. And you do not need to take my word for it. It was only this week that a member of the government, Senator Barry O'Sullivan, gave a speech about this very legislation, saying 'massive uncertainty' was created by the tax, which was reworked yet again last month, and the toing and froing over the tax 'had gone on far too long'. He said:

I do not want to seem critical of my own government—

but he was!—

but I think this whole exercise could well have been managed better and more promptly. All the information available to us to resolve the issues that presented to those sectors has been at our disposal for a significant period of time.

So, what happened? Despite the rubbish we have just heard from the member for Canning, who said this reform was the definition of good public policy, there was something called an election that got in the road, so that we had to have a stopgap measure to stop that infighting over that election period. The member for Barker paid tribute to the wonderful advocacy of the members for Braddon and Lyons. Well, they did not do very good job, because the community made sure that they became former members of this House! If they were so good, they would still be here; but they are not, and that is the reality, because quality people have taken their places now, people who will champion issues on behalf of the community, rather than letting politics get in the road.

We also have the uncertainty that has been caused to the agricultural and tourism sectors. The hypocrisy of those opposite knows no bounds.

Mrs Wicks interjecting—

I can hear the member for Corangamite interjecting, as she does. She is trying to defend the shambles once again, but she knows she cannot because she is on the record as being part of the mess that has resulted in fewer backpackers coming to Australia, with more pressures on the community.

When the announcement, the so-called miracle, came forward on the backpacker tax, a Victorian citrus grower and chairwoman of lobby group Voice of Horticulture said last week:

… industry had wanted superannuation for backpackers to be scrapped.

'Why are we just not saying that superannuation is not payable for backpackers but this amount has to be paid in increased tax?' she said.

'At the end of the day it's no benefit to the grower, it's now no benefit to the worker, so it's just another piece of administrative burden back on to those already overworked growers.

But she said after 18 months of uncertainty, Australia's reputation among as a working holiday destination had been damaged.

'We have got such bad publicity out there at the moment about this backpacker tax, a lesser rate would have maybe made it more attractive to people who have already booked their flights to New Zealand or to Canada,' she said.

'That reputation, I really have no idea how long it's going to take us to rebuild that …

So, instead of giving congratulations and pats on the back for what can only be described as a shambles of a policy, we need to ensure that this is properly reviewed.

It is all very well to say we have had 18 months of dithering and not making decisions. We have now seen, as a result of yet another government policy change, the passenger movement charge increase. Once again, a couple of weeks ago we were hearing from the government, 'We are not going to touch that, we are not going to increase that, but we have all sorts of problems with the backbench, we have all sorts of problems about the way this legislation has been managed that we are going to jack up the passenger movement charge.' Despite all the hysterics and lectures that we had about that issue, we are now seeing the government do exactly the same thing that they were condemning this side of the House for.

The amendment also says:

4. concerns have been expressed about the changes to the arrangements for Working Holiday Makers given the rorting, abuse and exploitation that has occurred.

We need only listen to the contribution by the member for Bendigo, who elegantly outlined the issues surrounding the Ombudsman's report which came down last week.

But I want to focus on some of the other contributions we have heard today from those opposite, and the absolutely breathtaking hypocrisy of people like the member for Murray—a big lion in his electorate but a little pussycat when he comes into this chamber. Before the election, he was saying we should scrap the tax, and the Liberal candidate in Murray said he was going to cross the floor. What has happened since? We have had a minor thing called the election and now he wants to be congratulated for his results. He warned that the tax should go in interviews before the election.

Now we are also seeing the Tasmanian agricultural sector raise serious concerns, and I know the member for Lyons will discuss that in his speech today. The Tasmanian government are against the tax. They know that there is a lot of concern and frustration about the lack of consultation, and I am quoting from media reports from September.

So we know there are around 200,000 working holiday-makers coming to Australia each year and in the 2015-16 year, there were around 214,000 working holiday-maker visas granted. We are talking about a significant amount of people that this tax will impact, but more importantly we are talking about the regional communities and the flow-on effects.

Representing a great state like Queensland, I am advocating on behalf of the tourism industry while I serve in this place. If you look at the amount of time backpackers have spent in Queensland, it has recently fallen by nine per cent. We know backpacker tourism is worth an estimated $3.5 billion to the Australian economy. I know that those opposite talk tough at home but when it comes to coming into this chamber it is a different story. Tourism operators in my home state have also been frustrated by the way the government has been handling this issue. In September of last year, Mary Carroll from the Queensland Tourism Industry Council, a former National Party candidate, said that the uncertainty around the laws was reducing the number of backpackers planning trips to regional areas and that it would have a devastating impact on the industry's future. She said:

We need to remove the uncertainty so it doesn't affect our long-term visitation in a year or so—

Fast forward to today—

or further out.

So the warnings to the government have been loud and clear but they have refused to listen to those warnings, and now they are paying the price. We are seeing a decrease in the numbers coming to Australia.

The passenger movement tax is being jacked up but we have no modelling on its impact and no consultation with the tourism sector. All they got was a phone call, apparently, from the Treasurer, not saying, 'What do you think about this?' but saying, 'It's happening,' on the day of the announcement. That is not good public policy, as the member for Canning would like us to have.

We know that this is a critically important issue. We know that this is an important component of regional tourism and regional employment not only for Queensland but for states like Western Australia, South Australia and Tasmania. So I simply say to the government this does not fit the definition of good public policy; it is the opposite. It is an example of how not to handle issues. I certainly hope that this is a wake-up call to the government. On behalf of members on this side of the House, we will be doing everything we can to make sure that that inquiry goes as smoothly as possible so that we get the best possible outcome for an important sector of our economy.

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

I rise today to add my voice to those urging the opposition to exercise some common sense and commit to supporting regional economies. We have heard countless stories in this chamber of the hardship that would arise from a 32 per cent tax on foreign workers undertaking seasonal labour, and I call on the Labor Party to act in the best interests of our rural towns and communities.

Before discussing the merits of the legislation itself, we must revisit the events that brought us here today, and that chain of events began long before the 2015-16 budget. In fact, it began when Prime Minister Julia Gillard altered the tax-free threshold in 2011. As many in this chamber would recall, Ms Gillard trebled the tax-free threshold from $6,000 to $18,200.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

A very good decision!

Rick Wilson (O'Connor, Liberal Party) Share this | Link to 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.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

I call the member for Lyons, and I wish him all the very best as well in the 45th Parliament.

Brian Mitchell (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Mr Deputy Speaker, for those kind words. It is much appreciated. What an extraordinary alternative universe we must be living in. This government has implemented a 32.5 per cent tax and somehow we have exhortations from the member for O'Connor, the member for Canning and other members on that side that somehow if Labor does not agree to what they want immediately we are to blame for implementing the tax level that they created. These are very strange times indeed.

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

Eighteen months ago.

Brian Mitchell (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

Eighteen months ago. I want workers on farms, picking fruit and getting produce to market. That is my sole motivation. If I had evidence before me that reducing the coalition's backpacker tax from 32.5 per cent to 19 per cent would get workers on farms I would be the loudest voice on this side of the parliament to bulldoze this through. But where is the evidence this will work? Where is the research proving the change will have real effect? Where are the surveys of the backpackers demonstrating the positive impact on their travel plans? Who has asked them whether reducing the rate to 19 per cent will bring them here? I suspect the evidence does not exist and unfortunately, with this mob, 'just trust us' does not cut it. Those opposite show time and again they should not be trusted with a butter knife, let alone the affairs of state.

This is the Treasurer's mess, but right up there as a willing supporter of this mad scheme is the Deputy Prime Minister, the member for New England—Baldrick to the Treasurer's Blackadder. What a great friend of the farmer the Deputy Prime Minister is—backing a tax that hurts fruitgrowers and sucks revenue out of regional communities. He and his Nationals colleagues make up one-fifth of the cabinet but between them they could not muster up the guts to oppose the Treasurer's tax on regions. The Deputy Prime Minister was in the House last week praising the tax. It is the most vocal he has been on this issue for more than a year. He was certainly mute when it counted most. Regional communities suffering from this new tax could not find him hiding under his big hat. Many might count it as a good thing that the member for New England remains silent whenever possible, but it would have been nice to hear him stick up for farmers and our regional communities. But of course he did not speak up when it counted, only when it became politically convenient to him. I listened to what the Deputy Prime Minister had to say last week and I even went to the trouble of reading his media statement on this matter. Life is short and I will not get those moments back, but his words did serve to remind me of what I can buy for two bucks a bag at farm gates throughout my electorate—and I do need to spread it soon.

The sad fact is this reduction in the coalition's backpackers tax from 32.5 to 19 per cent is more about a political fix than fixing the problem. It is about getting this disastrous blunder out of the headlines, not getting workers onto farms. The Treasurer created this mess by introducing the coalition's backpackers tax in his 2015 budget. It was then, and it remains, an ill-considered tax—a mad, crazy tax is how I have described it previously, and I hold to that description. My preference has always been for its abolition. I want it gone, full stop. I make no bones about that. I do not buy arguments that we cannot afford its abolition. This government wants to waste $200 million on an opinion poll and give $50 billion in corporate tax cuts. It has even found $160,000 to give my predecessor, Eric Hutchinson, a job attending functions on behalf of the President of the other place. Revenue and expenditure is a matter of priorities and I will support farmers and regional communities over bankers and former politicians any day of the week.

The coalition's backpackers tax as it stands right now will suck $500 million from regional economies and send that income straight to the ATO in Canberra. And that is the best-case scenario—$500 million less to be spent in shops and on services in regional communities across Australia. At worst, this tax will drive backpackers away, creating a severe labour shortage on farms, and will earn little for the ATO because of the simple fact that backpackers who do not come here do not pay tax. So farmers miss out on labour, communities miss out on workers' spending power, and the Treasurer—who has joined the chamber—misses out on the tax he was expecting to collect. It is a trifecta of failure and incompetence.

Sadly, it seems that the worst-case scenario is the one that is coming to seem the more likely outcome. Labour firms are reporting massive falls in the level of interest from backpackers. Backpackers are complaining that the tax rate is too high, and they are changing their working holiday plans for competing destinations like New Zealand.

All this should have been sorted out before the Treasurer announced his 32.5 per cent tax grab. But, through incompetence or arrogance or both, he failed to do his job and his due diligence. He went for the easy score. Now, after more than a year of damaging headlines and plummeting prospects for fruit growers and farmers, and after being dragged to the negotiation table by farmers and Labor, the coalition is proposing a compromise: a tax of 19 per cent instead of 32.5 per cent. But, with its trademark arrogance, the coalition is demanding that the 19 per cent be waved through the parliament immediately, while tagging on a brand new 95 per cent tax on superannuation earnings and an increase in the departure tax that has our tourism sector up in arms. 'Don't take a close look at the detail; don't examine whether the proposed measures will actually work; just pass it all right now, or the sky will fall in!' That is what they demand.

Well, on this side of the House we are more diligent than that. We are more calm, and we are more considered. This government has dithered with this legislation for more than a year and done nothing in the three months since the election. It might be panicking, but we are not. Labor will do its job properly.

As lawmakers, we need some measure of certainty, based on evidence, that the laws we pass will have the impacts that are intended. That is why Labor will send this bill to the Senate economics committee. The committee's work will not delay passage, but it will seek answers.

From my perspective as the member for Lyons, there is nothing good in this tax for the people I represent, at 32.5 or 19 or any other percentage. I know there is someone in the other place proposing a 10 per cent tax. I have made my own preferences clear. But I do not think we should rule anything out before we have all the facts at our disposal.

It is important to remember what this issue is really about. It is really not about backpackers; it is about practical labour solutions for Australian farms, and that is my focus. Many of the farms in my electorate do try to source their labour locally before employing backpackers, but the work is isolated and seasonal, so there are difficulties.

Everyone knows that Tasmanian cherries are the best in the world, but they are fiddly to pick. It is hard, hot work, and cherry growers rely absolutely on backpackers.

Michael McCormack (Riverina, National Party, Minister for Small Business) Share this | Link to this | Hansard source

Misleading the House! New South Wales—that's where the best cherries are grown!

Brian Mitchell (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

You've not tried a Tasmanian cherry, clearly! Somercotes in Ross, Stonecrest in Sorell and Edgewater in Ouse are spread throughout my electorate, but they all share a need for backpacker labour. All three made submissions about the danger this tax poses to them, in terms of discouraging backpackers from coming to Australia to work on farms.

These growers, and growers all across the country, deserve legislation that gets it right—that solves the problem. They deserve better than a quick political fix.

I must stress again, to counter the untruths being bandied about this place, that Labor's decision to send this bill to a Senate economics committee will not delay passage of this bill. Liberal MPs and senators who claim we are delaying this legislation and therefore risking this season should be ashamed of themselves. They are spreading fear that has no basis in fact—not to mention the bitter irony of being members of a government that created this tax and this mess and the long delay in addressing it.

Our farms do face a longer-term structural labour problem. Fewer backpackers want to come to Australia, and those who do are less likely to work on farms than to work in city bars. Locals are reluctant to work on farms because it is isolated and seasonal and, frankly, dealing with Centrelink in terms of reporting changes to income is a nightmare every sane person wants to avoid.

We do need to consider structural changes in our employment system, for both locals and those on visas, in order to ensure our food continues to be picked, not just this year but in the years to come. But that is a question for another time.

In closing, I will just note that last week the Deputy Prime Minister likened me to Dale Kerrigan—

An opposition member interjecting—

Dale, not Darryl—the hole-digger! Perhaps he was intending it as an insult. Well, I will take it as a compliment: the Kerrigans from The Castle are a quintessential knockabout Aussie family sticking up for their rights against big business. And they win in the end.

Rebekha Sharkie (Mayo, Nick Xenophon Team) Share this | Link to this | Hansard source

In the electorate of Mayo—from the base of the Barossa in Eden Valley, through the Adelaide Hills and across to the Lower Lakes, down the Fleurieu Peninsula to Kangaroo Island—we are fortunate to have the best pears, cherries, apples, strawberries, grapes, beef cattle, lamb, dairy and honey. We grow it all. And farmers across the electorate of Mayo rely heavily on backpackers to help get our amazing fresh produce to domestic and export markets.

In 2015, the federal government announced it was going to increase the tax on all money earned by backpackers to 32.5 per cent, as this House well knows. One can only wonder what the Nationals were doing when this decision was made. And I had always thought that the National Party's core constituency were farmers and the rural landscape. So I was incredibly disappointed, as a person who represents a very large and diverse rural community, that this was on the table.

This backpacker tax is not only very bad for farmers; it is also very bad for the Australian economy and for the coffers of the Australian Taxation Office. Backpackers spend almost all of the money that they earn in a region within that region. They help not only the farmers but also the broader community and economy when they spend their tourist dollar in shops, hotels and caravan parks across the country. And when the backpacker tax in Australia gets too high, the backpackers simply go elsewhere—and we have seen that this season.

The government has since backtracked on the backpacker tax, and their current plan is to reduce it from 32.5 per cent to 19 per cent. However, this is still significantly higher than the 11.95 per cent in New Zealand for earnings up to $14,000. I feel that, for this season, it is too little too late.

Thousands of backpackers have already changed their summer holiday plans and are now going to places such as Canada and New Zealand. The lack of policy vision and consistency is going to play absolute havoc with the fruit and vegetable harvests this year in my community. Farmers in my electorate and beyond are going to struggle to find enough hands to pick the fruit. All of this is because of this tax.

We have high youth unemployment in Australia. In some parts of South Australia, including within some parts of my electorate, it is as high 17 per cent. Youth employment never properly recovered after the global financial crisis. So many traditional jobs, like manufacturing in urban and regional centres, simply do not exist in significant numbers anymore.

High quality agricultural products are one of Australia's major international advantages. Population growth is projected to be almost 10 billion by 2050. As the middle classes of our nearest neighbours in Asia become more affluent and their demand for high-quality produce even greater, we have the potential to be the high-quality food bowl of the world. This a huge opportunity for Australia and our country's prosperity—if only we invest in agriculture to grow the sector and adopt the most creative and innovative techniques and technology.

Yet agriculture in Australia is being held back, and this tax is just one example. Increasingly, farmers are struggling to get the temporary or permanent employees to work the farms and bring in the harvest. And the farming workforce is getting older and older. In 2011 the median age of farmers was 53 years, compared with 40 for other occupations. I have all the respect in the world for our farmers. Just yesterday I was milking by hand at the Meadows Country Fair—in the rain, on a Sunday afternoon. It was a competition but it was incredibly hard work.

Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

How'd you go?

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Minister for Agriculture) Share this | Link to this | Hansard source

Gold?

Rebekha Sharkie (Mayo, Nick Xenophon Team) Share this | Link to this | Hansard source

No, I didn't win. But I did okay. I have room for improvement! This sector must be supported, and labour is one of the most critical issues. The increasing scarcity of farm labour may well threaten the long-term viability of the family farm, the farming way of life and the whole industry. However, within every threat is an opportunity. And it is with this in mind that Senator Xenophon and I have renewed our call to allow job seekers to work up to eight weeks on seasonal farm work and earn up to $5,000 without any penalty. Currently, Newstart allowance recipients can be hit with a reduction of 50 cents in the dollar for any money they earn over $104 a fortnight. If you earn enough to lose your payments altogether, it is particularly hard to get them back. When the work is often temporary, this barrier is too high, particularly for those who have never tried working in this industry before. So we feel that we should also include the jobactive providers in a seasonal employment strategy so that providers can find the best local Australian farm workers to work on their land. There is always the potential for temporary work to turn into a continuing job. And we may help renew the farming sector so that, when baby-boomer farmers do eventually retire, a life on the land continues to be a viable proposition for many Australians.

We know that many farmers and young job seekers are keen to give this idea a go. This very summer, there will be a massive labour shortage because too many backpackers have been scared away. Who knows how much long-term damage has been done to the Australian agriculture sector as a result. If we do not get creative about using the job seekers we have right here in Australia, there may be thousands of tonnes of fruit left rotting on the ground this summer. So I will do all I can to ensure that creative ideas to address labour shortages in this harvest and the harvests of the future are put out to the parliament and the public. I do support this legislation, although I have great reservations about its process, the outcomes and how it will affect my community of Mayo. But I cannot disagree with this motion, knowing farmers would have an even more difficult time getting the right labour for their farms.

Scott Morrison (Cook, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I move:

That the question be now put.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question is that the motion be put, as moved by the Treasurer.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

The question now is that the bill be now read a second time.

Anthony Albanese (Grayndler, Australian Labor Party, Shadow Minister for Infrastructure and Transport) Share this | Link to this | Hansard source

We have a farcical situation. We have circumstances whereby the member for Solomon has been denied the right to speak and make a contribution to this debate, as have the members for Braddon, Throsby, Paterson, Griffith, Shortland, Brand—

Tony Smith (Speaker) Share this | Link to this | Hansard source

The member for Grayndler will resume his seat. The Leader of the House on a point of order.

Christopher Pyne (Sturt, Liberal Party, Leader of the House) Share this | Link to this | Hansard source

Mr Speaker, I would seek your clarification because, watching the monitor earlier today, I swear I saw the member for Grayndler holding up the ALP's policy on tourism, which means he has already spoken on this bill.

Tony Smith (Speaker) Share this | Link to this | Hansard source

No, we are not in detail. The Leader of the House will resume his seat. I will repeat the question. The question now is that the bill be read a second time.

Question agreed to.

Bill read a second time.