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Monday, 7 November 2016
Page: 2004


Senator FIERRAVANTI-WELLS (New South WalesMinister for International Development and the Pacific) (17:13): I move:

That these bills be now read a second time.

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

Leave granted.

The speeches read as follows—

INCOME TAX RATES AMENDMENT (WORKING HOLIDAY MAKER REFORM) BILL 2016

This Bill is the first of four Bills to implement the Government's package to implement the Government's working holiday maker reform package.

This Government has been committed to getting the policy right on working holiday makers. The Government has been working hard to ensure Australia remains an attractive and safe destination for working holiday makers - a critical source of labour for the agricultural, tourism and hospitality sectors.

But at the same time, we have been intent on instituting reform that continue to allow us to arrest the debt and deficit left to us by our predecessors. Policy initiatives of this Government must be paid for, and this package is no exception.

The working holiday maker reform package will ensure working holiday makers pay their fair share of tax, establish an employer register and a compliance regime to address concerns about exploitation of working holiday makers.

The package shall also make changes to increase Australia's attractiveness as a destination for working holiday makers by reducing visa fees, providing new visa flexibility initiatives and providing additional funding for tourism.

Despite these significant and positive changes, the Turnbull Government's strict budgeting rules have applied to ensure the budget impact of these changes is fully offset. This can only be achieved if the package is passed in its entirety — we must be able to pay for the changes we want to make.

The 2015-16 Budget announced a measure to treat working holiday makers as

non-residents for tax purposes and tax them at 32.5 per cent from their first dollar of income.

This measure was introduced in response to the previous government's changes to the

tax-free threshold that meant working holiday makers who were residents for tax purposes and earning below the $18,200 tax-free threshold were effectively having not just a working holiday but a tax holiday as well.

Despite continuing to take advantage of Australian services and infrastructure, the obligation to pay Australian income tax was removed for many working holiday makers visiting Australia.

Concerns were raised about the impact of the Budget measure, particularly on our global competitiveness as a backpacker destination.

The Government listened to stakeholders and reviewed the broad range of issues affecting the supply and taxation of working holiday makers as part of ensuring the policy achieves its objectives.

The Government subsequently developed the working holiday reform package now before Parliament.

Our package acknowledges the importance of ensuring the integrity of the tax base in relation to what is an important area of growth in the economy, but also that this is done in an appropriate way that addresses the concerns of stakeholders that have arisen.

The Government understands that working holiday makers are an important source of labour in Australia for sectors that rely on seasonal employment.

After many years of strong growth, since 2012 the number of working holiday makers coming to Australia has been falling. There are many reasons for this decline, including the state of economy in their home country, exchange rates, competition from other jurisdictions, and airfares.

The Turnbull Government's package of reforms to working holiday maker arrangements not only ensures working holiday makers pay a fair amount of tax on their earnings but also increases Australia's attractiveness as a destination for backpackers.

This Bill will set the tax rate to apply to working holiday makers at 19 per cent from their first dollar of income up to $37,000, rather than the 32.5 per cent that applies to the majority of backpackers under non-resident tax rates and that would apply under the announced 2015-16 Budget measure. Ordinary marginal tax rates apply for income above $37,000. The new tax rate will apply from 1 January 2017.

Taxing working holiday makers at 19 per cent tax from the first dollar of income up to $37,000 is internationally competitive - Australia will still be a destination with one of the highest expected after-tax incomes for working holiday makers.

Even after taking cost of living differences into account, this change will mean that after-tax incomes for working holiday makers in Australia are comparable or better than New Zealand, Canada and the UK.

This Bill gives both working holiday makers and employers certainty about the tax arrangements that will apply, as well as protecting the integrity of Australia's revenue base.

The working holiday maker reform package makes other changes to lower the cost of coming to Australia for working holiday makers. A separate Bill will reduce the application charge for (subclass 417 and 462) working holiday maker visas by $50 to $390.

Tourism Australia will also promote Australia to potential working holiday makers through a $10 million global youth targeted advertising campaign.

We are also making other changes to working holiday maker visas to boost the supply of working holiday makers and make it more attractive to visit Australia.

Separately, we are extending the age of eligibility for working holiday makers from 30 to 35, increasing the pool of potential working holiday makers.

We are also introducing more flexible arrangements to benefit working holiday makers and industry, allowing an employer with premises in different regions to employ a working holiday maker for up to 12 months, with the working holiday maker working up to 6 months in each region.

The Government is aware of concerns about exploitation of working holiday makers. A separate Bill establishes a compliance regime to help address these concerns. In particular, we will be requiring all employers of 417 and 462 visa holders to register with the Australian Taxation Office.

Registration will entitle employers to withhold at the new working holiday maker tax rate of 19 per cent, from the first dollar of income up to $37,000, rather than 32.5 per cent.

Employers who are not registered will be required to withhold tax at 32.5 per cent from the first dollar of income. Working holiday makers whose employers withhold at 32.5 per cent will have access to the 19 per cent rate on lodgement of their tax return.

The registration process will be simple and will provide valuable data on the employment of working holiday makers. The register will be made public, making it easy to check the registration status of a potential employer. In addition, the Australian Taxation Office will prepare an annual report on working holiday maker employment.

The Government is also committing an additional $10 million to support the compliance operations of the Fair Work Ombudsman and the Australian Taxation Office to ensure employers are doing the right things by working holiday makers when they are working in Australia.

These measures are being presented as a package, as they work together to address the issues that have been raised with us. Together these measures will cost some $350 million to implement.

To ensure this package washes its face, two additional Bills outline what we will be doing to pay for these changes. The first provides for a one-off modest increase to the passenger movement charge of $5 to $60 from 1 July 2017. The second increases to 95 per cent the rate of tax on superannuation payments to working holiday makers after they leave Australia. This new rate will apply from 1 July 2017.

Ensuring the Budget is not worse off relies on passage of the full legislative package.

With this package the Government has achieved a better policy outcome for Australians and Australian businesses. We have done this however, while still adhering to the strictest principles of Budget management.

Full details of the working holiday maker reform package are contained in the explanatory memorandum.

TREASURY LAWS AMENDMENT (WORKING HOLIDAY MAKER REFORM) BILL 2016

The Treasury Laws Amendment (Working Holiday Maker Reform) Bill 2016 forms part of a package of Bills to implement the Government's working holiday maker reform package.

The Government is aware of concerns about exploitation of working holiday makers. To help address these concerns, this Bill establishes a compliance regime to ensure employers are doing the right thing by working holiday makers while they are here.

The Bill will also provide valuable data to the Government for the first time on the number of employers and distribution of working holiday maker labour. This will assist in reducing abuse of working holiday maker labour, assisting in compliance and enforcement activities, and helping the Government make policy decisions relevant to working holiday makers.

We will be requiring all employers of 417 and 462 visa holders to register with the Australian Taxation Office. This will entitle employers to withhold at the new working holiday maker tax rate of 19 per cent, from the first dollar of income up to $37,000, rather than 32.5 per cent. This creates an incentive for employers to register to attract working holiday makers.

Employers who are not registered will be required to withhold tax at the 32.5 per cent rate from the first dollar of income and may be subject to Australian Taxation Office penalties. Working holiday makers whose employers withhold at 32.5 per cent will have access to the 19 per cent rate on lodgement of their tax return.

The registration process will be simple, with employers agreeing to a few conditions by phone, email or online, and will provide valuable data on the employment of working holiday makers.

The register will be made public, with a list of registered employers published on the ABN Lookup, making it easy for working holiday makers and others to check the registration status of a potential employer.

The Australian Taxation Office could apply a range of penalties to employers for breaches of the tax laws, including failing to register.

The Government is also committing an additional $10 million to support the compliance operations of the Fair Work Ombudsman and the Australian Taxation Office to ensure employers are doing the right things by working holiday makers when they are working in Australia.

This Bill will reduce the application charge for subclass 417 and 462 working holiday maker visas by $50 from $440 to $390 from 1 July 2017. Reducing this charge by $50 will return the real cost of the charge to about the level it was in 2013-14.

Together with lowering the tax rate applying to working holiday makers, 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.

Full details of the working holiday maker reform package are contained in the explanatory memorandum.

SUPERANNUATION (DEPARTING AUSTRALIA SUPERANNUATION PAYMENTS TAX) AMENDMENT BILL 2016

The Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016 forms part of a package of Bills to implement the Government's working holiday maker reform package.

This Bill amends the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 to increase to 95 per cent the rate of tax on superannuation payments to working holiday makers after they leave Australia.

Working holiday makers can access the balance of their superannuation after they leave Australia and their visa expires or is cancelled. These funds which are accessed after the working holiday maker has left Australia are typically spent offshore.

The payment of this superannuation balance is known as the Departing Australia Superannuation Payment.

The new rate of tax introduced by this Bill will apply from 1 July 2017. It is estimated to raise $105 million over the forward estimates.

This Bill, together with the Bill that increases the passenger movement charge by $5, will fully offset the Government's working holiday maker reform package and ensure the Budget is no worse off.

The reform package will lower the rate of tax that applies to income earned by working holiday makers, which means they will have more money to spend during their holiday in Australia.

Full details of the measure are contained in the explanatory memorandum.

PASSENGER MOVEMENT CHARGE AMENDMENT BILL 2016

The Passenger Movement Charge Amendment Bill 2016 forms part of a package of Bills to implement the Government's working holiday maker reform package.

This package is aimed at ensuring Australia remains an attractive destination for working holiday makers - an important source of labour for industries that rely on seasonal labour such as agriculture, hospitality and tourism.

This Bill amends the Passenger Movement Charge Act 1978 to increase the rate of the passenger movement charge from $55 to $60 from 1 July 2017

This is the first time the passenger movement charges have been increased since 2012. The $5 increase is broadly in line with the increase in the consumer price index between 2012 and 2017.

In the intervening period, the Government has already acted to lower the cost for travellers and to improve their visitor experience.

We have invested significantly in improving the performance of our airports and the passenger experience through our airports.

We have also established the counter-terrorism units which form an important part of our border security, all funded out of the Budget.

We have also acted on recommendations of the Financial System Inquiry regarding credit and debit card surcharges. As a result of these changes, travellers in Australia are no longer subject to excessive surcharging, whether booking into a hotel, booking a flight or tickets to a show.

The Government is committed to budget repair. This increase to the passenger movement charge, combined with increasing the tax on working holiday makers' superannuation payments when they leave Australia is estimated to raise $365 million, fully offsetting the working holiday maker reforms and ensuring the Budget is no worse off.

Full details of the working holiday maker reform package are contained in the explanatory memorandum.

The PRESIDENT: In accordance with standing order 115(3), further consideration of these bills is now adjourned to 9 November 2016.