Working holiday tax change should make NZ look better by comparison
More backpackers may choose New Zealand over Australia for working holidays after Australian politicians agreed a 15 per cent tax on every dollar of their earnings.
At the moment, Australian residents and people visiting the country on working holidays aren't taxed on the first A$18,200 (NZ$19,200) of their annual income.
But from next year people on working holiday visas will have to pay tax at 15 per cent on all their income up to A$37,000, under a compromise deal which ends an 18 month stand-off between the Australian government and opposition parties in the Australian senate.
Normal tax rates are expected to apply on income over A$37,000.
The agreement means backpackers taking working holidays in Australia will often pay a slightly higher rate of tax than those in New Zealand, instead of no tax.
In New Zealand, the standard tax rate of 10.5 per cent, plus a 1.45 per cent ACC levy, applies on all income up to $14,000.
News of the Australian tax deal was prominently reported by British media outlets including the BBC and the Telegraph overnight, with both referring to Australian concerns it would make the country a less favourable destination than New Zealand.
But Horticulture New Zealand chief executive Mike Chapman did not believe it would have an impact on whether visitors chose Australia or New Zealand.
"The backpackers I see and talk to are coming to see the country – number one. The fact they don't have to pay tax in Australia may not be well known to them," he said.
Chapman guessed about 10,000 of the 60,000 people who worked in the horticultural industry in New Zealand each year were on working holiday visas, but he said a proportion of them would only work for a few weeks.
"They do a great job and help us through our peaks. There is definite demand for more people and if we can't get Kiwis, backpackers are part of the solution."
Backpackers are estimated to make up a quarter of farm labourers across Australia, and up to 85 per cent of farm workers in the Northern Territory.
Some Australian farmers fear the tax change could severely impact their ability to source labour.
French backpacker and restaurant worker Charlie Ucelli told The Sydney Morning Herald he thought it was normal for people to pay tax if they came to Australia, but the change would make it harder to save money.
Some other backpackers questioned whether it would make jobs such as fruit-picking worth it.
The Australian government had originally suggested a tax rate of 32.5 per cent and then 19 per cent, before compromising on the 15 per cent rate.