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Wednesday, 23 November 2016
Page: 3130


Senator RICE (Victoria) (18:34): I rise today to speak to the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016, the Treasury Laws Amendment (Working Holiday Maker Reform) Bill 2016, the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016 and the Passenger Movement Charge Amendment Bill 2016, or, as these bills are more commonly known, the backpacker tax.

The history of this particular reform could be used as a test case for the dysfunction of the current government. It was first raised in the 2015 Abbott-Hockey budget—that pitiful follow-up to the notorious 2014 budget that had tried to rip up the social contract only to find little appetite in either the Senate or the wider community for its wide-eyed assault on health care, education and welfare services. Instead, the government pivoted to a much more timid method of budget repair and tried to strip funding or gain review from little pockets and communities that they thought would not have the political capital to fight back. The ability of such a process to actually improve the budget is limited. The government has bullishly refused to acknowledge that, in fact, there is much more potential revenue available to pay for a world-class health, education and social services system and that there is more than enough economic rationale for productive non-recurrent debt spending on energy and transport infrastructure.

One of the groups that the government thought they could get away with clamping down on in the 2015 budget was working holiday-makers. Historically, working holiday-makers, or backpackers, have paid little to no tax with many backpackers choosing to self-identify as residents on their tax returns and tax agents coaching backpackers to do so if they stayed in Australia for more than six months. The Administrative Appeals Tribunal recently issued a rule clarifying that the six-month or 183-day criteria was not sufficient to be classed as a resident for tax purposes, but that has not filtered out into the community as yet. So the reality on the ground is that few backpackers are paying tax as nonresidents. Then, of course, in wanders the Abbott-Turnbull government.

Blessed are the holiday-makers, went their thinking, for nobody can inherit their vote. Here is a constituency that cannot vote. Here is a constituency that will not cost the coalition marginal electorates and may be a good place to find revenue. The original budget figure that they thought they would be able to get out of backpackers was $540 million over the forward estimates. That figure pales in comparison to some of the huge revenue opportunities that are out there, such as phasing out superannuation concessions, negative gearing, capital gains concessions or fossil fuel subsidies. Of course, these revenue measures, if the government acted on them, would bring in tens of billions of dollars. But the government are focusing on the backpackers, because they thought that the backpackers were not going to complain.

The government forgot that there is another constituency that deeply relies on backpackers and the working holiday-makers, one that has deep connections with the government. That constituency is the agricultural community. It is absolutely flabbergasting that the government failed to consult properly with the agricultural community before they put this into the budget. Back in 2015, the chair of the New South Wales Farmers' Association was adamant when he said:

This seems to have been done without any industry consultation.

Emma Germano from the Victorian Farmers Federation simply called the whole process a shemozzle.

After the justifiable backlash from the agricultural community and after months of lobbying and of the government kicking the can down the road, surprise, surprise, there was a dramatic shortfall in backpacker numbers during the 2015-16 summer harvest season. AUSVEG CEO Richard Mulcahy earlier this year said:

The Australian vegetable industry faces critical local labour shortages during peak seasonal periods, and our growers rely on backpackers to harvest their crops and prevent crippling losses.

… … …

If the ongoing decline in the number of backpackers coming to Australia isn't arrested, or if these workers aren't replaced with labour from another source like the Seasonal Worker Program, we are facing a very real threat to the future of our industry.

The National Farmers' Federation, the peak body for the Australian farming community, made a pre-budget submission for this year's budget, saying:

… 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.

So the government quickly shifted into face-saving mode, Minister Joyce went into hiding and the whole thing was put off for a review before the election. As always, the government retreated from making the tough decisions.

After six months of further deliberation and of the agricultural community telling the government just how rubbish their 32.5 per cent marginal tax rate was, the government emerged with the bill before the chamber today, which would tax backpackers at 19 per cent from their first dollar earned and would tax their super at 95 per cent. As many in this chamber and in the ongoing estimates and committee hearings have previously noted, Canada taxes working holiday-makers at 15 per cent, and New Zealand taxes them at 10.5 per cent. How then do the government think that 19 per cent is a sufficient decrease in their proposed tax rate in order to arrest the reductions in working holiday-maker numbers, particularly when you factor in the 95 per cent superannuation tax rate? That superannuation tax rate brings the tax rate overall to approximately 28 per cent. Have they done modelling to know exactly how the different tax rates would impact the number of working holiday-maker visas? No. It has been confirmed that the government failed to do any modelling on the impact of the new marginal tax rate on working holiday-maker numbers. Have they done modelling on the revenue difference of the different marginal tax rates? Well, Assistant Minister to the Deputy Prime Minister, Minister Hartsuyker, on ABC PM just days ago, did not know what the revenue difference would be between using marginal tax rates of 10.5 and 19 per cent. So it appears the government still do not know what they are doing or what the implications of this bill will be.

Despite 18 months of controversy and millions of dollars lost through the impacts of the uncertainty that the government has created, the government has still not made the case as to exactly why this bill in this shape is the best one for backpackers, for regional communities and for the budget. We already saw last summer what happens if the government lets this process go on: stories of hardship with fears that entire crops will be left to wither on the vine, due to growers being unable to access sufficient labour for their harvests—like persimmon grower Brett Guthrey, who came to Parliament this week to share his story. He said:

Sourcing backpacker labour is getting harder and harder - our fruit is going to rot on the trees.

He also said:

Attracting backpackers back to our sector will be difficult for many seasons to come.

Whatever the outcome in this place, the government's incompetence has already badly damaged the industry.

Growers from Orange were in this place too, talking to the government about how this tax would not only lead to a decline of backpacker numbers but that this decline might coincide with the tiny two-to-three-day window for picking ripened apples and that unpicked crops could lead to losses of millions of dollars. Is anyone surprised that the horrendous result for the Nationals in the Orange by-election has coincided with their inability to stop the Treasurer in his tracks on the backpacker tax? I think not.

The Greens, on the other hand, have listened to the community. We have listened to the peak bodies and the industry representatives, and we have listened to the local growers who are concerned about the future. They do not understand why there needs to be a backpacker tax, why the government cannot simply fix the problems that resulted from the Administrative Appeals Tribunal ruling, without slapping an exorbitant tax on backpackers and driving them away from our shores. They also want certainty, which is why some groups have resigned themselves to a 19 per cent marginal tax rate. But the government has the opportunity in this chamber today to support the Greens in making giving growers that certainty without compromising backpacker numbers or trying to gouge a pitiful amount of revenue from low-income earners. The Greens propose a very simple solution: for backpackers to be taxed the same as Australian residents—that is, for backpackers to enjoy a tax-free threshold, zero tax, up to when they earn $18,200 and then 19 per cent on up to $37,000 after that. That is the progressive tax system that we are all used to. It is very straightforward, very easy to administer and very fair.

Finally, I would like to tackle what some have said—particularly our state-based tabloids, but including some senators in this place—in regard to the concept that somehow our farming communities could cope with the shortfall in backpackers if only the lazy unemployed young people from our major cities and towns would get off their bottoms and come out to harvest instead of collecting Newstart or youth allowance. This is to fundamentally misunderstand the youth unemployment problem. Young people from Melbourne, Sydney, Adelaide, Ballarat, Launceston, Gladstone, Wollongong, Townsville, Cairns, Canberra, Newcastle and Brisbane—all across the country in big cities and regional towns—who are currently out of employment are not in a position to pick up their lives and go to the country for two months as an employment solution. Many of them have rent and tenancy agreements that they cannot break. Many of them have families that they are caring for. Many of them have specific career paths that they are on, even if they cannot currently find a position. Many of them know it is much smarter to keep searching for ongoing part- or full-time work than to spend a couple of months treading water, only to find themselves unemployed come winter. So we should dismiss this argument out of hand.

Working holiday-makers are a perfect solution to the needs of the agricultural sector, as they are, by and large, not tied down by tertiary studies, family commitments, career paths or the need for full-time employment. They are here to earn money, mostly to spend it all over the remaining months of their travels. I would note that this means that most of the tax revenue that the government was hoping to collect actually returns to the Australian community anyway. It is also well established that these working holiday-makers do not take jobs from Australians but in fact contribute a huge benefit to the economy, creating thousands of knock-on jobs in the tourism, transport and hospitality sectors across the country for Australian workers.

So, as Senator Whish-Wilson has so clearly laid out, today the Greens will move to align working holiday-maker tax rates with Australian resident tax rates. This would be a more competitive tax rate compared to our major rivals for working holiday-makers. It would be good for our regional economies both in terms of maintaining or improving on the number of backpackers working in the harvest season and in terms of building strong tourism economies in many of our transitioning rural communities. It would have very little impact on the budget bottom line compared to the 19 per cent marginal rate proposed by the government—especially compared with some of the big revenue opportunities that the government currently refuses to consider. Finally, it would put an end to the uncertainty, allow growers to have confidence in their ability to plan for harvest and put an end to this whole sorry saga.