Would tax on backpackers hurt Australia’s tourism?

New research has shown that the introduction of taxing backpackers who work while travelling around Australia, could have a significant impact on the country’s tourism industries.

Plans have been made by the federal government, to tax travellers who decide to work on their travels, at 32.5% from the first Australian dollar earned.

Many tourism stakeholders have largely criticised this introduction.

The survey asked 335 working holidaymakers from around the world who were staying in hostels in Melbourne, Port Douglas, and Cairns, between the months of May and June 2016.

YHA Australia, a youth hostelling association, and Monash University, conducted a survey which found that 60% of recent travellers would not have travelled to work in Australia, had the tax been introduced at the time.

Julian Ledger, the CEO if YHA Australia, said: “The findings generally were that backpackers were pretty alarmed.

“I think the difficulty is that mostly we’re talking about people picking up casual work on around about the minimum wage, $21-$22 an hour and if a third of that goes in tax the first dollar you earn there’s only about $14 left for food, transport and accommodation.

“It’s just not enough to make it worthwhile, especially if we’re talking about getting people out into regional Australia to do fruit picking and harvest work.

“We just need to remember that they don’t have to come here and they don’t have to work here if they do come and they can easily vote with their feet and not participate if we make the terms of their employment sufficiently unattractive.

“The reciprocal working holiday visa has been a great Australian success story, allowing young Aussies to go and work around the world and in return, something like 200,000 people come down here for a working holiday.

“But the previous Federal government whacked up the visa fee by 50 per cent back in 2013 and that's caused a significant decline, including a lot more people going to New Zealand, so we’ve got a bit of a case study there of what happens when the terms are made less attractive.”

62% of those asked in the survey said they would decide to got to New Zealand, rather than Australia, if the plans of the tax introduction were to go ahead.

70% said that they would seek out cash-in-hand jobs in order to dodge the tax altogether.

Dr Jarvis, Director of the Graduate Tourism Program at Monash University, said: “It is clear that the proposed tax changes will have a significant impact on potential demand for Australia as a backpacker destination, with 60% of Working Holidaymakers surveyed indicating that they would not have come on such a visa if the tax rate was 32.5 percent. In addition, only just over one fifth of travellers would recommend to their friends to come to Australia on a Working Holiday Maker visa and 57% would spend less time travelling around Australia. That means there would be a significant impact, in particular on regional tourism economies.”

The plans are currently being assessed by the federal government.

If the plans for the backpacker’s tax do go ahead, they will come into force at the start of 2017.