The Government’s so called ‘backpacker’ tax changes are set out in a package of 4 Bills, 3 of which have been passed by both houses and received Royal Assent. They are as follows.
- The Treasury Laws Amendment (Working Holiday Maker Reform) Bill 2016 – which received Royal Assent and became Act No. 89 of 2016 (on 28.11.16). This is the core Bill allowing the different tax treatment to apply to individuals holding a Subclass 417 (Working Holiday) visa, a Subclass 462 (Work and Holiday) visa or certain related bridging visas (‘Working Holiday Makers’) on their ‘working holiday income’. [APH Bills Digest; Bill & EM]
- The Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 was to impose a 19% tax on the ‘working holiday income’ of these Working Holiday Makers. [APH Bills Digest; Original Bill & Original EM]
- This was designed to be concessionary to non-resident backpackers, who would otherwise pay 32.5% tax (up to the end of the 32.5% threshold: $80,000). It was also designed to be unfavourable to those backpackers who succeeded in being non-resident (depriving them of the nil % and 19% rates up to $18,200 and $37,000 respectively). Taxable income that is not of ‘working holiday income’ would be taxed second (at potentially higher marginal rates).
- However, this Bill was not passed as a result of Senator Lambie’s proposal to tax backpackers at the rate of only 10.5% – to match the rate imposed by New Zealand on such income (with the same $37,000 threshold still applying). [Lambie Amendment] The Senate agreed to this amendment (on Fri 24.11.16), but the Lower House refused to accept the amendment (on 24.11.16 also).
- By the following Monday (28.11.16) the Government had agreed to a ‘split the difference’ 15% compromise tax rate. [Treasurer transcript] On the same day (Mon 28.11.16) the Government introduced a revised 15% Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 (No. 2). The Labor Opposition attempted to amend this Bill back to 10.5% but in the end the Senate did not press its 10.5% amendment and the Bill was passed by both houses on 1.12.16 and given Royal Assent as Act No 92 of 2016 on 2.12.16. [APH Bills Digest; Bill and EM]
- The Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016 was finally passed by both Houses (on 24.11.16) and received Royal Assent as Act No. 90 of 2016 (on 2.12.16). This Act increases the rate of the ‘departing Australia superannuation payments tax’ to 95 per cent for Working Holiday Makers. [APH Bills Digest; Bill and EM]
- The Passenger Movement Charge Amendment Bill 2016 – was also finally passed by both Houses (on 24.11.16) and received Royal Assent as Act No. 91 of 2016 (on 2.12.16).
- This Act amends the Passenger Movement Charge Act 1978 to increase the rate of the passenger movement charge from $55 to $60 for Working Holiday Makers. [APH Bills Digest; Bill and EM]
- As part of the 15% tax rate compromise deal (see above), the Government agreed to legislate to not increase the new $60 ‘movement charge’ for 5 years. It did this by introducing the Passenger Movement Charge Amendment Bill (No. 2) 2016 on 28.11.16, which finally passed both houses on 30.11.16 and received Royal Assent on 2.12.16 as Act No. 93 of 2016. [APH Bills Digest; Bill and EM]
[FJM] [LTN 228, 24/11/16] [LTN 229, 25/11/16] [LTN 230, 28/11/16] [LTN 231, 29/11/16] [LTN 232, 30/11/16]