Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This Bill is the key element of a broader package of measures to implement the Government's working holiday maker reform package.

This Government has been committed to getting the policy right on working holiday makers. It is important that our agricultural sector receives certainty.

The Government will therefore today put forward a bill which will propose working holiday makers pay 15 per cent tax on their earnings from the first dollar they earn up to $37,000, after which ordinary marginal tax rates will apply.

The Government thanks Coalition Members and Senators for their constructive contributions in resolving this matter as well as Senate crossbenchers with whom the government has reached agreement to deal with this matter.

Working holiday makers are an important source of Australia's international tourism and a key source of seasonal labour in regional areas, particularly in the agriculture, horticulture, tourism and hospitality sectors.

We have listened to stakeholders about declining numbers of working holiday makers in areas that rely on their seasonal labour. The Government wants to ensure that we have the workforce to meet these seasonal labour needs.

As a result of our negotiations in the Senate, this Bill will set the tax rate to apply to working holiday makers at 15 per cent from their first dollar of income up to $37,000, rather than the 32.5 per cent announced in the 2015-16 Budget. Ordinary marginal tax rates apply after $37,000. The new tax rate will apply from 1 January 2017.

Taxing working holiday makers at 15 per cent tax from the first dollar of income up to $37,000 is internationally competitive in terms of after tax income. Even after taking cost of living differences into account, this change will mean that after-tax incomes for working holiday makers in Australia are considerably higher than key competitor countries, such as New Zealand, Canada and the UK.

This Bill gives both working holiday makers and employers certainty about the tax arrangements that will apply.

The Turnbull Government's package of reforms to working holiday maker arrangements addresses stakeholder concerns about the taxation of working holiday makers and makes other changes to increase Australia's attractiveness as a destination for backpackers, while being conscious of its impact on the budget.

Full details of this Bill are contained in the explanatory memorandum.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

The Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 (No. 2) is bad policy for agricultural producers in this country. Let us be very clear about this. There have been plenty of heroes in this place hunting headlines, trying to come in at the last minute and do a deal. For the government, I am not sure; for agricultural producers, I am not sure. This is a 15 per cent headline rate for backpackers. Most backpackers in this country do not pay tax at the moment because they deem themselves to be residents for tax purposes. That is a situation that has worked very well for this country's agricultural producers, and it has been good for backpackers. This government has now put a new tax on backpackers of 15 per cent from the first dollar they earn through to $37,000. Let us be really clear about this. This is not a reduction in the tax rate. For all effective purposes, this is a new tax on backpackers.

Go across the ditch, across the Tasman to New Zealand, and backpackers pay a rate of around 12 per cent from the first dollar that they earn. It might sound on the surface that 15 per cent is pretty close to that and that it is competitive, but that is not the case, and let me tell you why. Backpackers in this country also pay 10 per cent of their salary into superannuation, the same as any other worker. This government is going to claw back 95 per cent of that 10 per cent of superannuation. So, for all effective purposes, that is another 9½ per cent tax on top of 15 per cent. So let us do the maths: around 24 per cent is the tax rate that backpackers are going to pay in Australia. Remember at the back of your mind that, at the moment, most of them are not paying tax in this country. These are some of the lowest paid workers in Australia, who fulfil a very important role for Australian industry. We want them to come here for their working holiday, we want them to work hard and we want them to spend their money in the tourism industry while they are here seeing this beautiful country.

It is a win-win relationship, but now, thanks to a stubborn Treasurer who is penny pinching, trying to raise revenue, we now have a new tax on backpackers which is effectively 24 per cent—twice what they pay over in New Zealand. And if anybody does not think the Kiwis are going to capitalise on this, they are living under a rock. This is a competitive situation to get labour in this country. So let us be very clear about this: this is not a good deal for agricultural producers. This is not a good deal for backpackers. This is bad policy, and the Senate should reject it. This is not about getting a political win for Mr Barnaby Joyce and Mr Scott Morrison. Some of the farming groups have been running around—the National Farmers' Federation—cheerleaders for the Liberal-Nationals party, saying, 'Take 19 per cent' and, when that did not happen, 'Take 15 per cent', because they think it is a good deal for the government, because they are trying to help the government out.

Well, we are trying to help agricultural producers, and we want to see this bill rejected and a competitive tax rate put in place to help Australian producers and help backpackers. The Greens will not be supporting this, and we have a second reading amendment. I move:

At the end of the motion, add:

", but the Senate is of the opinion that the increase in the tax payable on superannuation to 95% which is contained in Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016 should not be proceeded with.".

That would give an effective tax rate for backpackers that is much lower than the one that is being proposed.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I thank all senators who have contributed to this debate and I commend the bill to the Senate.

Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

The question is that the second reading amendment moved by the Australian Greens be agreed to.

Question negatived.

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

Question agreed to.

Bill read a second time.