A PROPOSAL to soften the backpacker tax has been submitted to the Federal Government's review process for cabinet consideration.
Heading into next month's Budget, farm groups have rallied strongly against the tax rate rising to 32.5 per cent on July 1 amid fears it will reduce seasonal workforces.
Last week a progress statement on an interdepartmental review process was issued by Tourism Minister Richard Colbeck Assistant Agriculture and Water Resources Minister Anne Ruston and the assistant minister to the senior minister, Keith Pitt.
It said a proposal had been prepared in consultation with Australian government agencies through an inter-departmental committee chaired by Austrade which had drawn on options provided by agriculture and tourism industry representatives.
"This proposal will need to be considered by the government and we will make an announcement in due course," the statement said.
"We have been extremely pleased with the positive and genuine engagement that occurred with the tourism and agriculture industries in developing the options that are now being considered by the government.
"The tourism and agriculture industries are two of the five key super-growth sectors that will support our transitioning economy over the next decade and the government will be ensuring the policy settings are right to support and capitalise on this growth."
Last month the federal government announced it would conduct a review of the 2015 budget measure imposed on tax arrangements for Working Holiday Maker (WHM) visas due to significant industry concerns about its impact.
The review encompassed industry consultations, inter-departmental negotiations and discussions with the Treasurer, the Employment Minister and Immigration and Border Protection Minister to prepare a cabinet proposal.
"During the consultations we held, the industry contributed many constructive recommendations," the statement said.
"The main issue for industry is the potential impact on Australia's regional workforce.
"They are concerned that the tax changes could add to already decreasing WHM numbers, impact on seasonal worker availability, hinder our international competiveness in attracting youth travellers and, potentially, result in an increase in unregulated cash payments to these workers."
The National Farmers Federation has run a campaign against the tax increase with an online petition that has exceeded 30,000 signatures.
Under current 417 working holiday visa conditions, backpackers pay a tax rate of 19pc up to $37,000 and 32.5pc up to $80,000 and are eligible for a tax-free threshold of $18,200.
The NFF has asked that the government make no change to the tax status of working holiday makers - but be ineligible for the tax-free threshold.
The NFF's pre-budget submission also asked the federal government to implement an approved contractor scheme for agricultural labour contractors, where contractors can seek "Approved Contractor" status from the Department of Employment by demonstrating sound business practices and a history of regulatory compliance, similar to the Approved Employer Scheme under the Seasonal Worker Program.
The NFF supports backpackers paying tax but said 32.5c in every dollar was too high.
The NFF's submission said backpackers were an important source of economic revenue, generating more than $3.5 billion to the Australian economy each year, and farmers relied on access to their labour at harvest time.
"Roughly 40,000 backpackers work on farms each year, and without them, the agriculture sector would face severe labour shortages," it said.
"The NFF supports backpackers paying tax but 32.5c in every dollar is too high.
"It means many backpackers will choose to go elsewhere, or stay in Australia for shorter periods.
"It means fewer workers on Australian farms and more workers attracted to the cash economy.
"A fairer approach would see the usual tax rules apply to backpackers but with no tax-free threshold.
"This would keep Australia competitive against comparable tourist destinations (Canada and New Zealand) which is important, because the number of backpackers coming to Australia is declining and other countries have much lower tax rates."
This week Shadow Tourism Minister Anthony Albanese and Shadow Agriculture Minister Joel Fitzgibbon urged the federal government to get its response to the backpacker tax right, to ensure Australia's tourism competitiveness and agricultural labour was not affected.
"First, the government must demonstrate that it has a plan to protect and grow demand for working holiday maker visas, not just cede our competitive edge to lower taxing nations in our region and allow application figures to continue to fall," a statement said.
"Second, Minister Colbeck must be able to show that the government is using reliable data on backpacker earnings to generate an estimate of revenue earned from the introduction of a new backpacker tax.
"Third, the proposal must have the broad support of the tourism and agricultural sectors following proper consultation, taking into account the unique nature of the tourism industry as both an employer of, and supplier to, working holiday makers.
"How the Government's proposal stacks up against these criteria will be the real test.
"Australia's tourism and agricultural sectors deserve better than another ill-considered and counterproductive measure introduced in haste."
Various government rural members have also opposed the tax increase declaring concerns about the lack of consultation on last year's budget measure while putting forward various alternate proposals to the Treasurer.
However, they've been told any change to current arrangements and the pending July 1 increase must be cost neutral, to the federal budget.
The government's review process has also received suggestions to change superannuation payment arrangements, including direct payments, with varied tax rates.
Mr Fitzgibbon said last month the backpacker tax increase was a mistake that was done without any consultation with the farm sector or the tourism sector and with no modelling to determine economic impacts.
He said an initial review was flagged to be conducted a government backbench committee but "the chair of the backbench committee said he knows nothing of the review".