PEOPLE FROM ALL OVER the world flock to Australia to see the Sydney Opera House, enjoy the warm temperatures, and relax on the pristine beaches. It has one of the most popular working holiday visas that welcomes travelers from more than 30 countries, many of whom do the agricultural work that Australians prefer to avoid, yet a new “backpacker tax” could it make it less attractive for working holiday makers in the future.
The Australian government has been considering a new tax on backpackers’ earnings for almost two years, and while the final tax is lower than initially planned, it still means travelers will be paying a higher rate than other people living and working in the country.
What is the backpacker tax?
There are two categories backpackers can fall into, depending on how long they stay in Australia and how long they work. They are considered non-resident if they are frequently traveling and don’t make any strong local connections during their stay. However, travelers can be considered Australian residents if they do make a permanent home in Australia for at least six months and develop routines to support it. This status makes a big difference to tax rates.
When backpackers are considered non-resident, they pay a base tax rate of 32.5% on every dollar they earn, up to $80,000 per tax year, after which it increases in line with the resident tax rates. However, before the implementation of the backpacker tax on January 1, 2017, travelers who were considered residents paid the same rates as regular Australians, which meant there was no tax on their first $18,200 of income. Under the new arrangement, backpackers will be taxed at a rate of 15% starting from the first dollar they earn.
This new tax arrangement also involved a change to the percentage of superannuation backpackers have to forfeit when they leave the country. Superannuation is essentially retirement savings paid by employers, but since few working holiday makers will end up retiring in Australia, they get some of this money back when they leave. Under the old system, the government took 38% of earned superannuation, but that has now increased to 65% for travelers who leave in 2017 and beyond.
Why is Australia doing this?
All this talk of the minutiae of tax rates ignores an important question: Why did the Australian government choose to change tax rates on backpackers? According to Charlie Armstrong of the Australian National Farmers’ Federation, about 40,000 backpackers find work on Australian farms every year, and contribute A$3.5 billion ($2.65 billion) to the national economy. Farmers lobbied hard against the backpacker tax because they rely on the labour of travelers to take in the crop, but many Australians believe backpackers don’t pay their fair share.
Those in favor of the backpacker tax argued that working holiday makers travel to Australia to benefit from the country’s high wages, then take their earnings abroad. However, this isn’t the case for the vast majority of travelers to Australia, who spend most of their money — both what they arrived with and what they earned there — living in and touring around the country. Unfortunately, the backpacker tax can be better explained by an increasingly hostile view of immigration that is found not just in Australia, but in the United States and Europe, as well.
For the better part of the past two decades, Australia’s governments have been obsessed with “stopping the boats” — in other words, ensuring that asylum seekers can’t reach Australia by sea. This has resulted in a cruel and illegal policy of offshore detention, where asylum seekers are intercepted before reaching the Australian continent and sent to facilities on Nauru and Manus Island. Successive whistleblowers and independent reports have made clear the suffering occurring in the offshore processing centers, which includes widespread physical and sexual assault, attempts or threats of self-harm by hundreds of children, and inadequate medical care. Instead of acting on these reports, governments from both sides of the political divide have been more likely to ignore them, while implementing strict rules to limit access by journalists.
While a sizeable majority of Australians now support closing the offshore detention centers, neither major party will commit to doing so, and this change of heart seems to be motivated more by growing reports of abuse than because opinions have improved about immigration. In 2016, the xenophobic populist One Nation party won four Senate seats and a poll showed a third of Australians were opposed to Muslim migration. One Nation’s leader Pauline Hanson isn’t new to using political office to push for racist policies.
Hanson previously held public office in 1996, during which time she campaigned vigorously against the rights of Indigenous Australians and claimed they weren’t disadvantaged, but privileged. There is no truth in her comments, and they ignore the long history of violence and discrimination that Aborigines have faced from settler Europeans. Aborigines have a lower life expectancy, worse health outcomes, lower incomes, and the UN has said the government’s treatment of Indigenous peoples is indicative of Australia’s “entrenched racism”.
Aborigines weren’t the only people targeted by Hanson. She also said that Australia was “in danger of being swamped by Asians,” objected to non-white immigration, and wanted to abolish multiculturalism. In returning to the political scene, Muslims have become the unfortunate target of her racist fervor, and One Nation is poised to pick up seats in state elections across the country.
Xenophobia isn’t just growing in the US
As people all around the world, but particularly Americans, try to respond to the racist policies being quickly implemented by President Donald Trump, they shouldn’t be blind to the growing xenophobia in other Western countries. The backpacker tax did not come out of nowhere, but is the result of a resurgence of racist and anti-immigrant sentiments in Australia that all travelers should be aware of when considering their trips Down Under.
For those seeking to avoid higher tax rates, New Zealand and Canada could be favorable alternatives that have the added benefit of remaining very open to immigration and multiculturalism. Australia is still a wonderful country, but, like in the United States, its political system has shifted to the right, and even predominantly white backpackers aren’t immune from its impacts.
Best Travel Credit Cards
Top offers from our partners
Chase Sapphire Preferred® Card
100,000 bonus points
The Platinum Card®
75,000 bonus points
American Express® Gold Card
60,000 bonus points