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Economics Legislation Committee

MACKENZIE, Ms Rachel, Chief Advocate, Growcom

TOBIN, Mr Travis, Chief Executive Officer, Queensland Farmers' Federation

Evidence taken via teleconference—

ACTING CHAIR: Welcome to both of you. We have a written submission from Growcom, which we have numbered as submission No. 22 and which the committee has read. I invite you both, if you should so choose, to make an opening statement and then Senator Ketter and I will ask some questions of you after that, if that is in order. These proceedings are being recorded by Hansard, as usual.

Mr Tobin : I will just make some brief opening remarks. I thank the committee for the opportunity to present today and for accommodating this teleconference. Queensland Farmers' Federation is the united voice of intensive agriculture in Queensland, representing the interests of 15 peak rural industry organisations across the state. The agriculture sector is critical to the success of the Queensland economy. It is regional and rural Queensland's mainstay employer and, importantly, a growing sector during the resources downturn.

Queensland has been united in its opposition to the originally proposed 32.5 per cent tax rate on the first dollar earned by working holiday-makers. Agriculture, tourism and the government recognise that, with about half of all backpackers coming to Australia choosing to holiday and/or work in Queensland, our state will be the hardest hit by bad working policies. Throughout the lengthy backpacker tax review process, QFF has consistently and strongly advocated for a fairer tax rate for working holiday-makers that is internationally competitive. We have continually advised that this process has and continues to create uncertainty for Queensland farmers and is damaging our sector.

Our position remains unchanged. QFF is strongly opposed to the 32.5 per cent tax rate and considers that working holiday-makers should pay a fair level of tax, but that tax rate—or however the various elements are packaged up—must be internationally competitive. Our sector needs and deserves certainty on this issue. QFF requests that, in its deliberations, the Senate heeds the importance of this and passes internationally competitive legislation as soon as possible. As you aware, a number of our member organisations, including Growcom and Cotton Australia, have been very involved with the government's backpacker tax reviews in March and September. Growcom's chief advocate, Rachel Mackenzie, is here, as you know, and I think she will say a few words as well.

Ms Mackenzie : Good morning and thank you very much for the opportunity to speak with you today. Growcom, as you may be aware, is the peak industry body for the Queensland horticulture industry. That represents fruit, vegetables and nut growers across Queensland and is worth about $2.5 billion to the Queensland economy. We are very regionally distributed from Stanthorpe in the south up to Cooktown in the north. We are highly dependent on working holiday-makers for many roles within our industry, including picking, packing and a range of seasonal roles. Something like 60 per cent of our workforce at certain times can come from working holiday-makers. It is estimated that we employ around 25,000 working holiday-makers annually. They really do make a significant contribution to our industry.

The role that they play would be hard to replicate from another labour supply because the nature of the work is seasonal and highly sporadic, with very intense bursts and then very quiet periods. They do play an absolutely critical role in our industry and we are very, very concerned about any possible policy that would have an impact on the number of working holiday-makers who are not only willing to come to Australia but also willing to work in the horticultural industry to get fresh fruit and vegetables onto the tables of Australian consumers.

I am deeply disappointed that we are still sitting here 16 months later debating this issue. I think we have raised our concerns consistently that 32½c from the first dollar earned is just not sustainable and will not enable our growers to be able to access the workers that they need. We have also consistently put on the table, as Travis alluded to, that we are supportive of working holiday-makers paying some form of tax. This tax rate needs to be internationally competitive to ensure that they are attracted to coming here and then have enough money to spend while they are here to support the regional communities that surround our horticulture industry. I am deeply disappointed that there have been revelations that there has been no economic modelling on the impact of this. It almost feels insulting that we are sitting here still debating this, and we still have not come to a resolution. All I can ask, as the number 1 point, is please have the 32½ per cent off the table and an internationally competitive tax rate on the table by 1 January.

Senator KETTER: Ms Mackenzie, following up on that last point you made—that you were deeply disappointed to hear there was no economic modelling—I note that your CEO's letter to the committee dated 21 October stated: 'This bill will deliver a 19 per cent tax rate for working holiday-makers immediately upon royal assent. Growcom supports this bill on the assumption that the modelling clearly shows that there will not be a significant drop off in backpacker numbers.' You have just acknowledged that we have heard that there has not been any economic modelling. How does this impact on your assessment to support this measure?

Ms Mackenzie : It highlights our ongoing frustration that we are expected to put forward our support or disapproval for certain policy positions with absolutely no evidence or capacity to support that. We are constantly being asked, 'What is the correct rate?' We are an agricultural policy organisation. I can tell you what the implications of a 32½ per cent are, but determining the correct rate is very difficult for us to do. The revelation that there has been no economic modelling is very concerning. We did have a look at the Department of Agriculture's submission, and, based on the assumptions that they have made, it does appear that 19 per cent is internationally competitive. I have had conversations with growers around Queensland, and I would say that there is a disparity in terms of whether the 19 per cent is the number that they support. When you consider that we have a 15 per cent rate for the Seasonal Workers Program and a 13 per cent rate for the Horticulture Award, it starts getting very confusing with all these rates. Fifteen per cent is broadly supported by a number of growers, but most of them say, 'Look, if you can get 19 across the line by 1 January we'll take it, because we need those pickers.'

Senator KETTER: On this issue of modelling, in our hearings last week we had the opportunity to discuss this matter with Treasury officials. They admitted to us that although they were not modelling the impact of the 19 per cent, they had made certain assumptions. One of the assumptions was about the reduction in the number of working holiday-makers that you would expect from a higher tax rate. One of the very assumptions that underpins the costings here does indicate that they do predict a reduction in the number of working holiday-makers. More surprisingly, they were not able to put a figure on that reduction. But, nevertheless, it is part of a number of assumptions that they made. Does that surprise you—that we are operating on that basis?

Ms Mackenzie : Once again, I will use the word disappointment. We would have hoped that there would have been a bit more transparency around some of the assumptions, and it concerns us that the ongoing success of our industry has been overlooked, it seems, in these debates.

Senator KETTER: You say that you support an internationally competitive rate of tax and you say that you support working holiday-makers paying some level of tax.

Ms Mackenzie : Yes.

Senator KETTER: Looking at some of our major competitors, Canada is on 15 per cent and New Zealand is on 10.5 per cent. I understand your point about base rates of pay being different, but how much do backpackers look at a whole range of factors, such as exchange rate and the cost of living, when they are making an analysis about whether to come to Australia? Would you not say that the headline rate of tax is going to be a significant factor in their consideration?

Ms Mackenzie : I will pass over to Travis in a moment, but I think that, unfortunately, all of the publicity created around this tax has made it a much bigger issue in backpacker's minds. Regarding the 32½ per cent rate, whilst initially it might not have been top of mind for backpackers, when they realised they were working so hard and getting so little, that would have quickly spread around the backpacker community and there would have been a significant drop-off. I think the publicity around this issue has had huge negative impacts on backpackers' willingness to work in Australia, but I will pass over to Travis now.

Mr Tobin : You would have seen that QFF came out publicly and supported the 19 per cent—we are just talking about the tax rate now. That is based on the various factors that influence international competitiveness and, again, as Rachel says, we do not have all this data at hand—we do not have the modellers, we do not have the economic power of a Treasury and a finance department. But it would appear, prima facie, that if you consider the higher wages in Australia—you factor in exchange rates, comparative costs of living, those sorts of things, then do some sort of rudimentary analysis on purchasing power parity—it does appear that 19 per cent is internationally competitive. So we have supported the 19 per cent on that basis.

That is not to suggest that we have done all the modelling ourselves and done it; we have supported it under those assumptions. What is critically important for our sector is that this uncertainty ends. Whether the number is 19 or whether the number is 15, everyone picks a number and then they can provide certainty and sell it to people who are looking to come on holiday and work in Australia, and explain why it is competitive. That obstacle that is currently there is then removed.

Ms Mackenzie : Ultimately—and I know this sounds a bit disingenuous—it does not actually matter on one level whether the working holiday-makers are getting a better deal or not; it just matters whether they think they are. We are dealing with a significant PR crisis internationally over this issue.

Senator KETTER: Since the initial announcement in the budget of 2015 up until 27 September this year when we received the revised package, what has been the impact of that period of uncertainty in your industry, Ms Mckenzie?

Ms Mackenzie : The main issue has been a high level of anxiety because, obviously, the tax rate will not be coming in until 1 January, if it does come in—and, hopefully, it will not. There has been a high level of anxiety amongst growers across Australia. Some growers have communicated to me that they are not prepared to make the investment in planting a crop if there will not be anyone there to pick it, so there has been a significant consideration of risk there. There are people who have been saying: 'I just don't know what to do. You've got to fight this. This is terrible.'

Interestingly, I did a labour survey with some of the regional areas for another purpose and spoke to people from each of the major growing regions in Queensland. I asked them had they seen a drop-off in backpackers to date and they said, 'Actually, we've had good backpacker numbers, but most of them have been saying, "We're working this year because we want to get the work while the tax rate is still favourable, and we're not going to be working once the 32½ per cent comes in".' It is really difficult to project what the impact will be, but that is the anecdotal evidence I got across the region.

Senator KETTER: In terms of this investment and the optimal rate of the backpacker tax, do your members have a view about what is the optimal rate? I know you are supporting 19 per cent but, in an ideal world, your members are saying something different to you, aren't they?

Ms Mackenzie : I would say that there is a diversity of opinion, and I think that is largely born from the fact that growers who have something that needs to be picked on 1 January, for example, are saying, 'Just get the 19 per cent—it's better than 32½.' Other growers who have already had their season are saying: 'In the long term that's a pain in the neck from a red tape perspective. That means we've got a third tax rate to contend with.' I would suggest that there is a diversity of opinion. If there were any sort of consensus division it would probably be the 13 per cent, which is in line with the horticulture award withholding tax rated.

Senator KETTER: So 13 per cent, in your ideal world, would be the rate?

Ms Mackenzie : I think that is from a red tape perspective, but I think that growers like ourselves are equally frustrated in that there is an expectation on them to come up with a magic number, which will influence behaviour of backpackers. They do not feel they have the capacity to do that. They just know that 32½ per cent is too high; 19 per cent is better than 32½ per cent, but does present a red tape burden; and 13 per cent is consistent with the tax rate they are currently using. That at least has the benefit of having less red tape and avoids yet another confusing tax rate to have to manage.

Senator KETTER: Did you put that position of 13 per cent to the government?

Ms Mackenzie : We did not put that position of 13 per cent to the government. When we went to the first review in March, I spoke with our regional growers, and they said they would prefer 13 or 15, but if we could get 19 across the line they would support that, because this needs to be fixed. That was six months ago. We were also working on an assumption that the modelling had been done and that 19 per cent was considered a rate that would not have a massive negative impact on backpacker numbers. So I think we have been operating in a vacuum of information.

Senator KETTER: Again, I do not want to put words in your mouth, but it sounds to me like the longer this issue has gone on, the more desperate your members have become to settle this issue and to settle on a sub-optimal outcome. Is that an unfair comment?

Ms Mackenzie : I will agree with the first part, in that they are desperate to settle this issue. I think that the timing of their labour requirements might dictate how satisfied they are with what could be perceived as a sub-optimal outcome.

Mr Tobin : This is an issue across all the industries that are dependent upon working holiday-maker labour. I said before and reiterate again: the issue is the uncertainty. You are in a situation where you have farm businesses making decisions and also people looking to come to Australia making decisions based on something that may or may not actually impact on what they are doing. People on both sides of this issue are making ill-informed decisions, and it just is not helping anyone.

Senator KETTER: Have you got some figures of the level of investment in terms of planting that is not going ahead because of this uncertainty?

Ms Mackenzie : No. Unfortunately we do not because it is quite anecdotal, but I can give an example of one grower in the Lockyer Valley. You have to remember that horticulture is high-value and has high input cost, so these sound like large numbers, but if you are talking about a single farm, to do the basic planting of a vegetable crop is in the order of $1 million. But that is for a vegetable crop. For other commodities, they have planted their trees five years ago.

Senator KETTER: You indicated that you participated in the first review in March, and you said there was an information vacuum since then. Since you have provided your input back in March, can you tell us what type of consultations have been occurring?

Ms Mackenzie : There was that initial consultation in March, and we were very disappointed that there was no resolution at that point. We felt that we had made a very big effort to put a collaborative, cross-agriculture position forward using the best information we had available at the time. Subsequently, there was the review conducted in September with Deloitte, and we participated fully in that. We have been writing letters and trying to communicate to various politicians our concerns around this issue.

Senator KETTER: It does not sound like there was a great deal that happened between March and September. Is that correct?

Ms Mackenzie : There was the obvious decision to put, for want of a better word, a moratorium on it until 1 January, so that was a positive. However, I would not say that the consultation has been fantastic.

Senator KETTER: You said that working holiday-makers constitute 60 per cent of the workforce in the horticultural area. Would it be fair to say that horticulture is the biggest user of backpacker labour in the agricultural sector?

Ms Mackenzie : That is my understanding, yes.

Senator KETTER: Would you have a rough percentage?

Ms Mackenzie : I am sorry, I did not catch that.

Senator KETTER: Would you have, as a percentage, the proportion of the total industry that horticulture represents in terms of backpacker numbers?

Ms Mackenzie : Are you saying which percentage of the backpacker workforce is utilised by horticulture? Is that what you are asking me?

Senator KETTER: That is a better way of putting it, yes.

Ms Mackenzie : Unfortunately, I do not know the answer, but my understanding is that we are the most significant users of working holiday-makers. We also have to remember that they do not stay in one place; they move around. So they may well work for the horticulture sector for a significant proportion of their time here, but then they may also work in other parts of agriculture. Again, that is not data I have at hand.

Senator KETTER: I am going to ask you about the passenger movement charge. Do you have a view about that being included in the package? Mr Tobin, I might direct that to you.

Mr Tobin : We know the concerns that have been raised by the airline and tourism industries around this. I do not think it is appropriate for us to comment on something that directly impacts another sector. Obviously, it does not have direct relevance on agriculture, but—

Senator KETTER: With respect, if it has an impact on the number of backpackers coming to Australia, then it is a matter that does impact on you, isn't it?

Mr Tobin : Yes, I understand what you are saying. I guess I am not inclined to comment too much about it, because it directly impacts a sector other than ours. On face value, you would consider that a $5 increase is not a significant amount, but not being intimately across how changes in certain costs affect that sector it would be hard for me to comment on what the impact would be.

Senator KETTER: I am going to ask you about the superannuation changes. I think the words that the NFF used were that it is less than ideal. What is the view of the QFF? Is it similar?

Mr Tobin : Yes. I think QFF and the membership in general is somewhat reserved about the position that has been taken on superannuation. There is already an issue with administering payments for individuals who have no intention of retiring in Australia, and it has been a frustration across agriculture for some time. It seems like a bit of a pointless exercise. I guess we do not see it as being a particularly well thought out position to take on this.

Ms Mackenzie : Would you mind if I added something additional?

Senator KETTER: I do not mind.

Ms Mackenzie : I think that we have long held the position that paying superannuation to backpackers which they cannot access until they leave the country seems rather perverse for a whole range of reasons. However, once again, if there is a perception by the backpackers that the removal of their superannuation makes Australia less attractive, then that is of concern to us. But we do not know the answer to that question, because this has just recently emerged as a policy initiative. The other thing that we would consider is that there seems to be, once again, no clear information regarding how many backpackers actually access their superannuation once they leave the country. If it is considered a carrot that brings backpackers here and they would see the removal of that carrot as a disincentive to coming here, then that is the concern. But we do not have any data. I was speaking to one of the major super providers and they seemed to indicate that around 80 per cent did access their super. For those backpackers, that obviously has an implication as to the attractiveness of Australia as a destination. Our position, as we put forward in our submission, was that, as this would not come into force until mid next year, perhaps we could ask for some modelling, some numbers, some research, some analysis, some data so that we could make an informed decision about this. I would also request, as we said in an earlier proposition, that funds be directed to assist horticulture, or agriculture more generally, to develop a workforce solution that is not so reliant on working holiday-makers. That will take investment and it will take time.

Senator KETTER: Were you consulted about the dangers to the superannuation tax?

Ms Mackenzie : No, we were not. But I need to be clear that, in the position that was put forward as the collective position in March, there was a position that there should be some change to how super was administered to backpackers, but the idea was that it would be redirected into supporting rural and regional Australia and there was not clarity around exactly how that would work. And, once again, I think we are operating in this vacuum of information where we have not had any data. We need to have a clear understanding about how many backpackers actually access that super and how they perceive it.

Senator KETTER: So, Ms Mackenzie, I understand that your organisation seems to be between a rock and a hard place on this particular issue, but we have seen Treasury saying that they do make assumptions about the fact that the number of working holiday-makers will be impacted by increases in tax. Your position is looking increasingly tenuous, isn't it, in terms of the future? You have an industry that is reliant on working holiday-makers to the tune of 60 per cent. One could almost argue it is a certainty that these factors added up are going to see a reduction in the numbers of backpackers.

Ms Mackenzie : It is necessarily about a reduction in the number of backpackers that concerns us; it is a reduction in the numbers of backpackers who come and work on horticulture properties that concerns us, I suppose. Yes, it is concerning. And I think the more that this is aired publicly the more difficult it will be to fix the public relations mess that we have got ourselves into. But, at the same time, I think our growers have been consistent in saying that backpackers should pay some tax while they are here, and it is a question of determining a rate and making it fair, and then promoting back to the backpackers that it is a fair rate. And there are a lot of other reasons why they do come here. Promoting that is not our job as an industry organisation.

Senator KETTER: Okay. We talked about the deterrent effect of having a 19 per cent rate on people coming to Australia. I want to turn to the issue of what happens when people do come to Australia, despite knowing that there is going to be a 19 per cent rate. What impact would it have on their decisions when they are here? A higher rate of tax for working could well impact on the number of the people opting to work as part of their time here in Australia.

Ms Mackenzie : It could indeed.

Senator KETTER: So there is a double-whammy impact.

Ms Mackenzie : Yes. Like I said, and this is where it gets so difficult—you are saying: 'could', 'may', 'might', 'maybe'. We do not know the answer to these questions. What we do know is that we need something in place that is not 32½ per cent by 1 January, and it needs to be internationally competitive, and we need to have some kind of sell-job on that with backpackers to reassure them that they are not being ripped off while they are here.

Mr Tobin : If I could just add, I think it comes back to what I was saying before. I do not think anyone would look at the package and say, 'Yes, it is ideal.' There are elements in there that probably raise concern across different industries for different reasons. What we all do know is that we need to end the uncertainty, we need something that, on best-case, seems to be internationally competitive and we need the Senate to pass that as quickly as possible.

Senator KETTER: Sure. I understand that point of view. But you would agree that the legislation should be properly considered and some work should be done in looking at the effect of the legislation. I understand Mr Tobin your members, as I said, are between a rock and a hard place on this issue. But that is no reason why we should end up with a suboptimal policy outcome, because of a situation which is entirely at the instigation of the government.

ACTING CHAIR: I am not sure that that was a question.

Mr Tobin : Yes. I guess I would just add—stating the obvious—that 1 January is going to come around fairly fast.

Senator KETTER: So, in Queensland, we know that horticulture is the greater part of the sector that uses the working holiday-makers. But can you tell us what type of other roles backpackers take when they are here in agriculture in North Queensland? Perhaps, Mr Tobin, that is for you.

Mr Tobin : Across the QFF membership, obviously, horticulture is one of the industries that a lot of backpackers end up working in. We also have quite a number of backpackers who work seasonally in the cotton industry to meet periods of peak demand, less so in industries like cane. It is hard for me to put numbers on exactly what percentage work in what industries, but it is fair to say that they do work in all agricultural industries at one point or another.

Senator KETTER: In terms of estimates for your members, have you made any assumptions about the impact of the 19 per cent tax rate on the future of your industry and how it will impact? Mr Tobin, firstly.

Mr Tobin : I guess, obviously, labour would be the first issue. As you are aware, working holiday-makers contribute 25 per cent of the labour force in agriculture. There is not clearly an alternate source of that labour at this point in time. There does need to be a greater review of agricultural labour and how that can be improved, but we do not see this—what has become a backpacker tax review—being the mechanism to do that. We welcome government looking to work through a better way to get people working in agriculture, but this is clearly not the time to do that because of the effects it is having on the sector in the short term.

Ms Mackenzie : I think it is very difficult, once again, for us to understand what the behavioural response of backpackers will be to a 19 per cent tax rate, which on the surface, based on the evidence put forward by the department of agriculture, is internationally competitive. So I guess, personally, here in Brisbane, it is hard for me to make a determination on how a backpacker makes a decision about where they come. What I do know is that 32½ cents in the dollar leaves them with very little money to survive and travel around, which is their major purpose in coming here. So—

Senator KETTER: In the interests of time—I beg your pardon. Sorry, I cut you off.

Ms Mackenzie : Sorry, you are breaking up.

Senator KETTER: I have one further question, which is in the area of the impact of cash in hand in the agricultural sector. Do you have a view as to how prevalent that is and whether or not the change in the tax rate is going to have an impact on that level of cash-in-hand activity?

Ms Mackenzie : Currently, it certainly exists. I do not have any hard data on how prevalent it is. I would suggest that, logically, a higher tax rate will result in potentially more cash-in-hand transactions; however, we are working in other spheres to try and really tighten up our sector's adherence to workplace laws and we are working really hard with our members. So I would hope if the rate is set at a reasonable rate, then we should be able to manage that issue. If it is set at 32½ cents, then I think there is much more incentive for backpackers to be seeking out those cash-in-hand roles.

Senator KETTER: Thank you. Thank you, Chair.

ACTING CHAIR: Thanks, Senator Ketter. Thanks, Mr Tobin and Ms Mackenzie. I just have a few questions in the limited time available to us. I take it from your written submissions and from what you have both said that your biggest concern is the uncertainty and anxiety facing your members until this matter is resolved. Is that correct? Am I reading that properly?

Mr Tobin : I would not say 'biggest'. I would say that in the short term it is creating a problem, so there needs to be a resolution to that one way or another.

Ms Mackenzie : And I think the anxiety is obviously only there as a response to a real issue, which is that this tax rate of 32½ cents will drive backpackers out of our workforce.

ACTING CHAIR: Hopefully the fact that this legislation has passed through the House of Representatives and will be dealt with by the Senate within a fortnight addresses some of the uncertainty and anxiety, whether or not it is an outcome everyone likes. Do you think that will at least overcome that uncertainty and anxiety problem?

Ms Mackenzie : As we articulated in our submission, we would like the 19 per cent passed as soon as possible. We would like the super changes passed and to have an opportunity to investigate the implications of that more thoroughly. We do not have a position on the passenger movement charge, because we think that is a matter for the tourism industry. We have some questions about how the grower registration process might be handled. I think you would please a significant proportion of our members if you were to pass the 19 per cent as soon as possible, leaving the other issues, as I said. However, I think that you would please them more if it were 13 per cent. I know that is sitting on the fence a little bit, but unfortunately I think we have been pushed to this point.

ACTING CHAIR: Thanks for your written submission. Other submitters have put this, but I particularly like your table 1, which explains it. It shows that the net hourly wage after the payment of tax at 19 per cent in Australia is $14.34—much more than in Canada, at $9.41, and a little bit more than in New Zealand, at $13.65. But you do acknowledge, rightly, that the cost of living in Australia is a little higher. On that basis, on those figures you have, that would seem to make us competitive with Canada and New Zealand. Is that how you have read it in your submission?

Ms Mackenzie : That is how we have interpreted it, but I think there are a whole lot of other factors. For example, it is incredibly difficult from our perspective to do a direct comparison. I think the comparison that was put forward in the department of agriculture's submission is more comprehensive and probably more reflective of the range of issues that we are dealing with. A direct comparison is hard because of casual loadings, piecework rates and the fact that in New Zealand you can offset wages with accommodation and in Canada the cost of living is lower. There are a whole range of factors, so it is really difficult to do that analysis.

ACTING CHAIR: Sure. One of the other witnesses this morning suggested to us that there is no superannuation question in New Zealand. Are you familiar with that at all, either of you?

Ms Mackenzie : That is my understanding but, as I said, in some ways it matters more whether the backpackers think they are getting a good deal than the actual nature of the deal itself, in a fundamental way. If they felt historically that one of the carrots for coming to Australia is the little departure bonus, then that is a problem that we need to deal with.

One of the positions we have put forward is that we should raise the threshold from $450, which was put in place in the 1990s, I believe. At the very least, we should enable them to access the funds here when they finish the working component of their holiday so that they can spend the money in our regional communities rather than somebody else's.

ACTING CHAIR: Another witness this morning suggested that one of the main reasons backpackers come to Australia is the feeling or the concept that people are safe here, that it is a safe place to live and work. Do you have any comment on that?

Ms Mackenzie : I would say that the data and the evidence probably support them, but I am not really qualified to have an opinion on that.

ACTING CHAIR: That is fair enough. I just put it to you to see if you had a thought on that.

Mr Tobin : I think questions like that are probably best directed to backpackers themselves, if you want to get an insight into some of the elements that go into the decision making.

ACTING CHAIR: Thanks for that. You just mentioned—I know you said it in your submission—that the superannuation question perhaps can be considered, but we need to get this implemented from 1 January. The new super arrangements are not scheduled to come into play until 1 July next year. You would be hopeful that there would be some further consultation on that in the meantime. Is that as I understand it?

Ms Mackenzie : Consultation and perhaps some good figures on actually how many backpackers access that because we are hearing everything from 40 per cent to 95 per cent. I guess, the only people who actually know that are Treasury.

ACTING CHAIR: That is a good point. I have heard that very few of them get their money, but, as you say, there is a range of figures. I just wanted to make that clear.

Mr Tobin : Just on that, I would add that we would welcome and encourage the government to engage in a greater discussion about superannuation. There are clearly a number of areas that could be improved. Maybe this is a good time to do so.

ACTING CHAIR: We note that.

Senator KETTER: Just for the sake of the record, I am reminded that Treasury informed us last week that something like 95 per cent of backpackers claim the superannuation on departure.

Ms Mackenzie : I was surprised by that figure because I had read previously that it was 45 per cent, and our contacts in the super industry were saying 80 per cent. I think some clarity around those figures would be most appreciated.

ACTING CHAIR: We can take that on board. I am interested if you have any figures of how many of your members actually employ labour directly as opposed to how many of them use employment agencies to do it. This, of course, relates to your submission about the registration factor and the need to consult. Do you have any information or an anecdotal feel about the percentage of your members who employ directly as opposed to working through employment agencies?

Ms Mackenzie : Anecdotally, the number employing through employment agencies or labour hire companies seems to be increasing, although I do know of a couple of high-profile major growers who have actually stopped using labour hire companies because they just have so much trouble with compliance. I think that it is a growing trend. As the complexity around employing people becomes greater, labour hire companies become more of an attractive option. However, there is a risk there in that you put yourselves at arm's length from what is actually going on. We work with our members to try and get them to utilise a labour hire agreement so that they have some understanding and something in writing in terms of what is going on. It is also my understanding that the University of Adelaide has been commissioned through the Horticulture Innovation Australia vegetable levy to do quite an extensive survey. They will be reporting early next year and they will hopefully have some good data around that issue.

ACTING CHAIR: Since your written submission, where you were asking the ATO to consult with you on the registration process, which you indicated in your written submission was as yet uncertain, have you had any contact from the ATO or anyone else about the formalities of registration?

Ms Mackenzie : None at all.

ACTING CHAIR: That is something the committee might be able to take up. Finally from me, I think I understand your submission about the superannuation. As I understand it, if someone is earning less than $450 in their employment period you do not have to worry about superannuation. You are suggesting that should be increased. Am I reading you correctly there?

Ms Mackenzie : Correct, yes.

ACTING CHAIR: Could you just explain that a bit more?

Ms Mackenzie : It is not my area of speciality, but my understanding is that the thresholds were set back in the 1990s. So if someone earns less than $450 whilst in your employ you do not have to pay them super. At that stage it was a weekly wage, and now it is obviously significantly less than a weekly wage. We have a high level of movement from place to place. I think sometimes $450 can be achieved in two days. So you can have someone who is with you for two days or less than three days, and you still have to fiddle around sorting out super. I would, if I could, like to take some of that question on notice and get back to you with some more detail because I feel like I am not as across it as I would like to be.

ACTING CHAIR: That is fine by me. Mr Tobin, do you want to add to that at all?

Mr Tobin : I just want to say that the minimum threshold has not been changed for some years, so you would have to question whether it is current.

ACTING CHAIR: I am not putting your submission in your words for you, but, if we were looking at something like an average weekly wage, perhaps that might be fairer and then, of course, it is a question of how that impacts on the bottom line of the budget, which the government has to be mindful of if nobody else is. Although, again, I do acknowledge that both of you have acknowledged the need for some tax on foreign workers, but perhaps that is something that the government might be able to consider in the interregnum before the superannuation tax takes effect.

Ms Mackenzie : That would be good, and it would be good for us to have an opportunity to consult with our members as well about what a reasonable rate would be. I did actually try and go back to find out whereabouts that $450 was derived from and what the rationale for it was, and I must confess it was difficult to get the answer. One would hope that the Treasury officials or the people who make those decisions would have a thorough understanding of that.

Senator KETTER: I just have one further question, if I could. I asked you earlier about your statement in your letter of 21 October that says you support the 19 per cent tax rate on the basis of the modelling that clearly shows that there is no significant drop-off in backpacker numbers. Were you given assurances prior to your support for the 19 per cent tax rate by the government that there would be no significant drop-off in backpacker numbers?

Ms Mackenzie : No, we were not consulted. We probably made the assumption that the 19 per cent tax rate was based on some form of modelling. There is also the logical idea that 19 per cent is the first marginal tax rate, so effectively it is removing the tax-free threshold for working holiday-makers, and that is how the rate was determined. But I would suggest that the level of consultation with us has been mixed to minimal, apart from the Deloitte consultation, obviously, in September.

ACTING CHAIR: Thanks to both of you for your time this morning and for helping the committee with your advice. We very much appreciate it. The committee secretariat will send you copies of the Hansard recording of your evidence and, if there is anything that needs correction to, please contact the secretariat. You have also taken a couple of questions on notice. We would appreciate it if we could get the answers to those at the earliest possible time because this committee has to report by 7 November. The reporting, of course, is a prerequisite to being debated in the Senate, so the earlier you can get those in the better and more speedily the Senate can start debating the issue, hopefully resolving the uncertainty and anxiety at least. Thanks, again, very much, and we may hear from you in the future.

Ms Mackenzie : Thank you very much, Senators.

Mr Tobin : Thank you.