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Economics Legislation Committee
31/10/2016

MORO, Mr Joe, President, Mareeba District Fruit and Vegetable Growers Association

[12:24]

ACTING CHAIR: Welcome. As you have probably worked out, we are interested in hearing your views. No doubt a lot of them will be similar to that of the two witnesses we just heard, but you will give a local perspective to that. For the purposes of the hearing, this is a hearing of a parliamentary committee and parliamentary privilege applies. We are recording all of this on Hansard. If you would like to make an opening statement, we would be keen to hear from you and then ask you some questions. Otherwise, we will just ask you questions.

Mr Moro : I am appearing on behalf of the Mareeba District Fruit and Vegetable Growers Association with regard to the backpacker tax—the 19 per cent, the super and the package that it includes. I will make a little bit of an opening statement. The industry in The Tablelands is dependent on backpackers to a degree, probably not as great a degree as mentioned by Growcom, because we also have a large local workforce. And the peak occurs in a good time for us in that it also attracts a lot of students that are finishing up studies at university and also some high school students in their last or second last year, so it brings a bit of an influx.

During the year we have bananas and papaya predominately going all year, as a percentage, they are probably closer to 50 per cent. So there is a difference depending on each of the industries depending on the time of the year, so the dependence on backpackers varies from month to month.

Our proximity to Cairns also gives us a very good advantage. I have been asked a number of times, 'Have we seen any drop offs?' Technically, I have not seen any drop offs.

ACTING CHAIR: Sorry, what is that term?

Mr Moro : The feedback I have received so far is there has been no drop off, at this point, of backpackers not being made available for the workforce up in our area. But the 32 per cent tax rate was of concern. We felt that in the long term that would create instability in the backpacker attraction to Australia. We put forward a number of submissions in the early part—not in the last part or any submission to this committee. We had the opportunity but we did not have time to do it. Basically, over the period of time we have suggested the superannuation be taxed at a higher level to recoup. We are on the record saying that. I am supportive of it.

We also indicated that we would have preferred a lower rate closer to 15 per cent. To be really honest, to take up the other speaker, our issue is equity amongst all our workers, including Australians. Thirteen per cent, in our opinion, would have been fairer right across the board, because from my experience with backpackers it is all about their take home pay. Their take home pay is what they are sensitive to.

Whenever we have had discussions in the past, before the changes to the tax free threshold, the 32 per cent was discussed with backpackers. There was a great deal of sensitivity about that issue and how it operates. From our view, the outcome is a compromise. We took the view from amongst the industry groups that 19 was the consensus across Australia, but our preference has always been a lower tax rate around the 15 per cent. In fact, if you really want to ask the question, and you probably will, 13 is the ideal, because from a red tape point of view and a practicality we would treating all our workers in our workplace the same. We would have thought that would be the fairer way from a red tape point of view.

On super, I will also make one comment. We have been in discussions with government for a long period of time—both Labor and the Liberal-National Party—with regard to the threshold of $450 issue. We had a recent discussion with Treasury about it 18 months ago with regard to increasing that, and there was some discussion with Treasury that they were looking at that issue. I had discussed it with some Treasury officials at the time but it never eventuated any further.

In 1990 when the superannuation was brought in it was brought in at $450 as the threshold. We are not saying that backpackers or Australian workers should be exempt, they should be treated the same. We would argue that it should be on a monthly basis. I think the $450, at the time, was over a week or two weeks depending on the amount of work a person did on a property. Originally, when superannuation was first brought in to the old award—which goes back a long time ago to when I had hair—it was talked about that certain workers that did not work within a month, that left your business, would not be required to pay super. They were the original award negotiations that occurred going back before the superannuation guarantee was put in place. When the $450 came in, it probably represented workers work more than 38 hours through the proper legal processes. It depends on how you gauge that work, but the 450 could be easily achieved in one week back then. Now that $450 can be done within 1½ or two days quite easily, as well, so we think that the threshold should be increased.

Some of my growers would suggest increasing it back to what was negotiated or talked about back in the eighties, which was one month's pay, because that would reduce the red tape and a lot of the back work you have to do in that area. We are not suggesting they should be for one specific sector of the employees; it would be across the board. So any discussions about increasing the threshold would be, I think, accepted pretty widely, and it will reduce red tape. There is a lot of staff that we do lose on a weekly basis, and doing the red tape, doing the super and doing all that running around for us is a high administration cost. If there is to be further discussion on it, we would like to be part of that discussion.

ACTING CHAIR: Thanks very much, Mr Moro. I should be telling you this, rather than asking you: you and others have mentioned this 13 per cent payable to horticultural workers. Can you elaborate on that for me.

Mr Moro : Under the seasonal work arrangements with the tax office, for a six-month period we are given the exemption to not use the tables but to do a flat tax rate of 13 per cent across the board. It is specifically six months in horticulture. I think the shearing industry might have that same right under the tax office to deduct at that level.

ACTING CHAIR: How long has that been in place?

Mr Moro : A long time. It used to be 15 per cent. There were some changes made, I think, around the period when GST was introduced. It was 15 per cent, then it was brought back to 13 per cent because there were certain offsets made when the GST came in versus the income tax that was being collected. But 13 per cent has been there for a fairly long time. Treasury would know that information. It is not part of the award; it is actually a Treasury ruling, or that advice they give. But it is only for six months, and after that we would have to revert back to the normal tables that are used for any other employee. It is for casual workers only. I think the shearing industry might have that same right.

ACTING CHAIR: You live and learn! For seasonal workers, the Pacific Islander workers are taxed at 15 per cent.

Mr Moro : I believe so. I have never employed any, but I have heard from a number of people who do that it is 15 per cent. I guess the reasoning for my association—the Mareeba and District Fruit and Vegetable Growers' Association—is that we said, 'Well, if you're doing it for the seasonal workers at 15 per cent, it seems to be fair and reasonable that we suggest 15 per cent.' But, as I said—and I have been asked many times what we prefer—to be brutally honest, lower is always better as far as we are concerned, because the tax rate is an incentive and a disincentive both ways. The critical thing to remember with backpackers is what they get in their hand, and I do think there would be an issue with what an Australian worker would get paid versus what a backpacker would get paid. Being taxed even at four per cent will create some issues within the packing shed or the field, but it is manageable because it is four per cent. But lower is better in this situation.

ACTING CHAIR: Lower, of course, means that—

Mr Moro : That is from our perspective only!

ACTING CHAIR: Except that you, as a taxpayer, will have to pay more eventually if someone else is not paying tax.

Mr Moro : And we were mindful of that. That is why we suggested 15 per cent. We all suggested super as well, for that reason there.

ACTING CHAIR: What is the four per cent?

Mr Moro : The four per cent—oh no, it will be six per cent difference, sorry, between 13 and 19.

Senator KETTER: I am looking at an article from the Cairns Post earlier this year, where you were quoted as warning that the tax hike will deter backpackers from living, working and spending money in the far north. I think, to be fair, you were referring to the 32½ per cent tax at that point.

Mr Moro : That is right. It was the 32½ per cent.

Senator KETTER: But even at 13 per cent or 19 per cent, it represents an increase in tax that working holiday-makers are paying. To what extent do you see any increase in the level of tax as a disincentive for backpackers to live, work and spend money in the far north?

Mr Moro : Well, 32½, obviously, had a greater impact; 19 has an impact as well. As I said to you, we have, over the last six years in particular, been taxing our backpackers based on ATO advice at 13 per cent, so they are all treated the same in the packing shed. Obviously, they spent that money locally, either directly in the Mareeba-Atherton area or they spent it going to a place like Cairns or Mission Beach or even travelling to Darwin, or wherever. In that sense, the closer the number gets to 13, the more equitable it is from our perspective. That is what we actually physically tax our workers in the hand. We are also aware that they were claiming that tax, because of the tax-free threshold being raised, when they left the country. So, as far as we were concerned, that money was not being spent in Australia; it was being spent elsewhere. Our thinking is that it is more in line with an equity issue, and also, fairness, in the sense that they should pay some tax. There is a strong belief within our association that they should pay some tax.

We were a bit surprised hearing about super, in some cases, being collected and spent. We were under the impression that it was going towards a retirement package, so they had superannuation or a pension set up in their own country. So it was a bit of a surprise that they were actually getting money to leave the country—and that was an issue amongst a lot of my members; they felt it was unfair and an exploitation of the system.

Senator KETTER: Would you agree, though, that the ability to recover their superannuation on departure was part of the incentive for backpackers to come to Australia?

Mr Moro : I do not think so. My impression from backpackers when they work on the farm is their first goal is how much money they have in their hand, and that is what they are spending. After a period of time they find that out and, of course, they look forward to collecting that money when they go. What some of them do—I have had experience with them because of the two-year extension visa—is use that money to leave Australia for a period of time. They probably use the super and the tax that they collected to go and spend it in another country.

Senator KETTER: The figures that we have had are something like 95 per cent of people—

Mr Moro : I have no doubt that it is that high because the backpacker community has very robust communication; they communicate well with social media and they have their own websites—it is like wildfire. The only time they do not have that information is when they first arrive in Australia, but within a period of a month or two, they are pretty well versed on what their rights are. They are entitled to do that. What they are doing is legal—I am not saying it is not. In our opinion, and from the feedback I am getting from backpackers that work for me, and also other farmers, is that that money is not being spent in Australia. It is what they get in their hand that they spend in Australia. So the closer that was to 13, from our perspective—mindful of the Pacific Islander question—was equitable in our opinion.

Senator KETTER: If I understood you correctly, you mentioned that in the banana and papaya growing sectors of the industry, the backpacker component of the workforce is about 50 per cent?

Mr Moro : Yes; it would be about 50 per cent. They have a high reliance because they run for a longer period; I mean they are going all year and they do not have the luxury that we have of that influx of students that come in. What I mean by 'we' is I am a mango farmer and I can have a third to half of what we would call students, either university students or year 11 and 12 students who are on holidays, during that period, but that tapers off obviously once the holiday period ends, and you become more reliant on the backpackers.

Senator KETTER: If there was a reduction in numbers of backpackers coming to Australia, would those be the sectors of the industry hardest hit?

Mr Moro : I would imagine so, and I think it would also go across into the peak season. Not only do we employ a lot of workers all year, but from December through to March is the peak, when we have mangoes, lychees, avocados, longans and some other tropical fruits, so although it is still only a third, the number actually fluctuates—it rises a lot higher. Bananas and papayas are still growing, so you are still employing 50 per cent. It varies from crop to crop. It also depends on where a farmer is situated, whether he has accommodation, transport—the mix. But, yes, the short answer is they are more reliant on backpackers on a yearly basis.

Senator KETTER: We heard earlier from Ms McKenzie from Growcom about farmers in the Lockyer Valley, for example, are not investing in planting because of the uncertainty associated with the ultimate rate of tax. Have you heard similar stories?

Mr Moro : I have seen no evidence. In fact, we are in the opposite situation where there is still a lot of investment occurring, so I have not seen that—not in the tablelands and not in the Far North Queensland area.

Senator KETTER: Is that because your farmers have not seen any major drop-off in backpacker numbers at this stage?

Mr Moro : As I said to you, there is a concern there but there is no evidence as far as I can tell at this stage.

Senator KETTER: In terms of consultation with the government on the 19 per cent package, what would you say about that?

Mr Moro : I would say from day one, if I can go right back to eighteen months ago when Mr Hockey announced it in the budget, we were very disappointed that we were not part of that consultation process at all. I think that it was a slow uptake on the issue, because there were a number of letters exchanged early on with the Treasurer's office, regarding the 32. In my opinion, there has been a lot of pressure put, through the political process, to get to this point. From a consultation point of view, I think it has been a bit disappointing. Local members have done a lot of work for us, on both sides of the political spectrum, and we are very supportive of that. And I think the members from the regional areas had a better understanding versus the members of parliament that were based in the big cities, where they did not appreciate the importance or thought it was just an easy option to do.

Senator KETTER: What is the contribution of your sector of the economy to the overall economy in North Queensland?

Mr Moro : If you look at it from a horticultural point of view, the Atherton Tablelands is over half a billion now, it is a record-breaking number. And my industry in particular is probably around about the $350 to $400 million part of it. What you are taking out of the 500 is sugar and dairy, both those industries are worth about—I think sugar is worth about 49 up in my end of the woods, and the dairy industry is probably in that same ballpark. So that is 400 or so million dollars that is the horticultural industry.

Senator KETTER: And within the industry, what is the role of backpackers? What types of positions do they take?

Mr Moro : They are predominantly either field workers, or packing shed workers. By the fact that some of these young people are well educated as well, they do take on other key positions within the packing shed. I have had people who have experience in industrial relations that I have given a position in looking after all the paperwork, and they know all about the super and all that. They have got a lot of enthusiasm, and they can bring a lot of skill. But predominantly it is picking and harvesting, and pruning, obviously.

Senator KETTER: And machinery operators as well?

Mr Moro : In some cases. It depends if they have got the appropriate skills. Like I said, they are well educated—most of them, if not all—and they have a wide range of skills. Some of their driving abilities—they probably have not done enough driving in the big city, so we have to educate them a little bit. But they have the basic skills; they pick it up pretty quickly. So yes, they do some of that work. Just a general comment: for most of the farmers on the Tablelands, their preference is always to employ locals in the key positions which, because they are ongoing, are generally filled by farmhands, if you want to call them that, or foremen, that have been in the industry for a long time, and they have those skills in tractor driving, and they take those key positions. But some backpackers do fill those positions, if the positions become vacant or if there is a need during that period. But predominantly what we call locals fill those positions.

Senator KETTER: Just finally, Mr Moro, you heard Ms Mackenzie's deep disappointment at the fact that no modelling has been done on the impact of the backpacker tax. What is your view about the impacts of the 19 per cent on backpacker numbers, down the track?

Mr Moro : As I have said a couple of times, and I have said it in the media as well, we would like a lower number. We think it is an incentive, the lower the number is. At the same time, we have also taken the position—as Senator Macdonald has said—that we are taxpayers as well. We think there should be an equity issue there; there needs to be an equity issue there between people we employ as locals as well. So the short answer is, if we were at 13, I think it would be a lot more harmonious within the packing shed, from our point of view, because of that ruling issue. Fifteen is closer to 13, and 19 is obviously a little bit further away from it. I don't think it will be a deterrent, because I am also getting feedback from some of the backpackers that I have—I am not employing anyone yet, but I do talk to them when I go to see some farms—which is that they are more comfortable with the 19. There is some confidence in it. The key issue, from my point of view, is the uncertainty that has occurred over the last 18 months—and that if we continue to have this uncertainty for longer, it will have a negative impact. But I don’t have any evidence directly for the table as to say that that has eventuated over the last 18 months.

ACTING CHAIR: Do your members generally work through employment agencies when they are using backpackers, or do they do it direct themselves?

Mr Moro : I would say the majority on the Tablelands do it direct themselves. We have had a view that some of the contractors that try to come into the area don't do the right thing, and there is a preference to manage it yourself. The problem that is arising is that the large operators, especially, who are looking to minimise costs and to manage their workforce more sustainably, tend to lean towards the contractors. On the smaller family farms, generally, I would say—and I have no evidence of this, but I am going to just take a guess on it—there is about 90 per cent, while if you go to the larger farmers there is probably down towards 70 per cent. From an area point of view, probably 20 per cent of the farmers might use contractors on an off-and-on basis. Predominantly, it is family farm operations. A lot of farmers want to treat their workers at a certain level. Mareeba has a very good reputation, and we want to keep it that way—the Mareeba tableland and the Atherton Tableland—so the tendency has been to stay away from contractors. But they have definitely been in the area. There have been a couple of bad incidents that have occurred in the past, and I think that burnt some fingers of some farmers, and they have decided that it is not worth the hassle. But there are contractors operating on the tablelands.

ACTING CHAIR: Growcom, in their submission—and you might have heard me mention this to them—said there is going to be compulsory registration under this package for anyone who employs backpackers. They were concerned about another bit of red tape that they would have to deal with. Growcom were asking that the tax office consult with them in relation to this registration process. Do you have a view on that at all?

Mr Moro : Well, we hate red tape—that is just for the record—so the less the better. But we understand that there needs to be some process in the system. Hopefully, it will be minimal—and I make that comment, and that we would like to be consulted. We will probably leave it to Growcom to take that issue further with Treasury and whomever. Like I said to you with the superannuation side, the less red tape we have the better the systems work, but at the same time we also do not want anyone to be taken advantage of.

ACTING CHAIR: I think that is about all I have. Thank you very much, Joe, for coming along and sharing your recognised wisdom with the committee.

Mr Moro : It is always a pleasure. I will get you an invite to the next growers dinner, which, just for your information, will probably be the second Friday in September, but it does vary depending on the amateurs they have down here. We do not like to clash with the amateurs.

ACTING CHAIR: Free advertisement on Hansard; there you go.

Mr Moro : I am sure everyone reads Hansard!

ACTING CHAIR: That is your payment for coming along.

Mr Moro : I appreciate it. Thank you for your time and thanks for coming to Cairns.

ACTING CHAIR: Thank you. With that, I declare the hearing adjourned until Wednesday in Launceston.

Committee adjourned at 12:47