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Fruit Picking Jobs & Working Holiday Jobs Position Backpacker Tax Senate Enquiry Submission Preface This submission has been created by Fruit Picking Jobs & Working Holiday Jobs Australia for the Senate Enquiry into the backpacker tax and subsequent reforms to the following legislation, 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. www.fruitpickingjobs.com.au Established in 2011 Fruit Picking Jobs is a platform that connects employers and harvest workers all over Australia. With the incentive to undertake regional work and obtain the second year visa 85% of our members are on a working holiday visa. Basic Numbers: Lifetime Members: 142,000 New Members: 800 per week on average Facebook Fans: 61,000 www.workingholidayjobs.com.au Established in 2013 Working Holiday Jobs is a platform that connects employers and recruiters all over the country with working holiday makers. Employment opportunities exist across all industries, predominantly featuring hospitality, laboring, admin, temping and regional work. Basic Numbers: Lifetime Members: 52,000 New Members: 200 per week on average Facebook Fans: 40,000 Fruit Picking Jobs & Working Holiday Jobs Position This submission unequivocally rejects the notion of a backpacker tax. We support the retention of the status quo, where working holiday makers will pay some tax (either as a resident OR a non-resident for tax purposes) and then proceed to spend their earnings as they disperse widely through regional Australia, filling vital horticulture and agriculture labour needs along their way. Working Holiday Maker (WHM) have already dropped 21% over 3 years.1 This Submission supports the following, • Repeal the decision to change the tax-free threshold rules for working holiday maker visa holders. That is, scrap the backpacker tax; • Apply current tax free threshold rules, including allowing WHMs to meet the residency test; • Raise the age threshold for working holiday maker visas to 35 • Deliver “work rights” information to WHMs in their own language either prior to or on arrival / create a public job register for employers that wish to employ WHM. • Roll out a targeted global youth campaign (Tourism Australia) to address the negative sentiment about the “backpacker tax”; • Raise the current caps applying to source nations for 462 visas where the allocations are exhausted (for example Portugal, Greece and Spain); • Conduct an in-depth study into Working Holiday Makers travelling in Australia building on the National Institute of Labour Studies research report published in 2009. • Develop / invest in technology to deliver ‘matching’ between WHM and employer; Better promote and encourage second year visa options; • At a minimum, freeze visa fees. Consider adjusting the WHM visa fee down in the next budget forecasts to be more competitive globally, particularly with New Zealand; Australia must focus on growth strategies rather than taxation measures to supplement government revenue, simultaneously injecting economic stimuli into national and regional economies. Maintaining a revenue neutral stance on legislation that was created without Industry consultation or proof of financial modelling is not good fiscal policy. If this tax goes ahead we will hurt regional communities, create a WHM job black market “cash economy” and tarnish the Australian image, losing brand ambassadors and millions of 1 Working Holiday Holiday Maker Visa Program Report dollars in tourism spend along the way. We are trying to strengthen our relationships with partner WHM countries not break them. Evidence of Decline The Updated Tax Proposal is effectively a 25.27%2, factoring in the superannuation tax in the updated proposal. Analyzing research based on a 32.5% tax the evidence is clear that the updated backpacker tax will still have a negative on the Australian economy. We believe these findings are still extremely relevant. Monash University Survey 3 The study conducted by Jeff Jarvis at Monash University found that, • 60% of the sample would not have come to Australia if the tax was 32.5 percent. • 57% of WHMs also said that they would spend less time travelling in Australia if the tax changes were to take effect. • 69% saying they would spend less on tours. • 70% said they would look for cash-in-hand jobs to avoid it. Working Holiday Jobs Survey 4 5,000 working holiday makers responded to a survey by Working Holiday Jobs, with the majority leaving comments for the minister. (These are available on request) Finding bel • 89% would consider doing a working holiday elsewhere if they knew about the backpacker tax before coming to Australia • 90% would be deterred from doing fruit picking / harvest / 2nd year visa work if they were taxed 32.5% • 89% would be deterred from working in Australia if taxed 32.5% • 95% thought this tax will deter future working holiday makers from visiting Australia 2 19% income tax + super tax (95% v 38% = 6.27% of wage) = 19+6.27 = 25.27% 3 Dr Jeff Jarvis, “The motivations of working holiday makers”, Monash University, 2016 4 Working Holiday Jobs Backpacker Tax Survey Flawed Financial Modelling The fundamental issue with Treasury’s projections is that they are based on flawed financial modelling. There has been no empirical study done which provides the basis for the projections. Furthermore, with the WHM grant rate in decline, an incentive for cash payments, a strong disincentive to work at all and more attractive work conditions in other destinations, the government will, without a doubt, see its revenue from WHMs across the board contract: including income tax revenue. Revenue Neutral The whole concept that the solution needs to be revenue neutral is ridiculous. Industry has seen no evidence supporting the governments estimation of the “$540 million dollars in revenue”. Given that this is for fourth review into the “backpacker tax” we urge to the senate enquiry to recommend the solution solve the problem, not having to be revenue neutral. Working Holiday Makers Currently Struggle Anecdotally speaking working holiday makers struggle to get by with the current tax situation. In a survey undertaken by working holiday jobs there were over 3,000 messages to the government from Working Holiday Makers about their thoughts on “backpacker tax proposal at 32.5%”. As mentioned previously these can be forwarded to the senate enquiry. Some comments from WHM’s have been included at the end of this submission. Losing Brand Ambassadors The working holiday maker program was introduced in 1975 with the main purpose to "promote international understanding by enabling young people to experience the culture of another country." Since then, the scheme has grown from 2,000 participants to 226,812 in 2014/15. In an industry fueled by word of mouth and social media the introduction of a “backpacker tax” would have serious affect on working holiday maker numbers. These working holiday makers are our brand ambassadors all over the world, to introduce a backpacker tax would mean passing them on to Canada and NZ. Cash Economy With a 95% super tax and a 19% income tax there is exceptional motivation for the employer and employee engage in a cash in hand payment arrangement. As cash in hand work does not count towards the 2nd Year Visa the tax will decrease WHM appetite to work in regional areas. Meaning less rural workers and money flowing through those rural economies and less revenue income and super tax revenue raised. More cash in hand work leans itself to a higher chance of worker exploitation. Paying Tax • WHM contribute $260 million in GST annually5 • Many WHM are still non residents for tax purposes and are subject to the 32.5% non resident tax. • WHM that are residents for tax purposes and earn over $18,200 pay income tax • WHM currently pay 38% Superannuation tax on exit. • The exit levy will affect all Australians and travelers leaving Australia. • The average working holiday maker pays $1,291.98 per annum income and super tax6 With incentive for both the employer and employee to participate in a cash economy their will be a decrease in the revenue raised from income tax and superannuation. The tax will deter WHM from visiting Australia also decreasing GST revenue and stimulus into the economy. Super Growth Sector Tourism and Agriculture are super growth sectors, Australia must focus on growth and stimulus rather than taxation measures to raise revenue. Introducing measures such as the backpacker tax will only hinder the success of these sectors. Mobile Workface Working Holiday Makers can relocate anywhere around Australia on a days notice. This is why they are so effective meeting labour shortages in the unpredictable and weather affected agricultural industry. As WHMs travel to these remote towns they stimulate regional many communities along the way. Can an Australian afford to pay rent both at home and near the farm while being paid an award agricultural wage? WHMs are a vital part of the Australian economy and if we fail to acknowledge that their will be long term ramifications. Job Register We completely support the concept of a job register and education of WHMs and their working rights. We believe this is an important aspect to stopping exploitation of WHMs and ensuring a safer and more pleasant experience in Australia. 5 2009 Department of Immigration and Citizenship study 6 Taxback.com average WHM tax contribution Working Holiday Maker Numbers Working Holiday Maker numbers have dropped off 21% in three years7, 249,231 in 2012/13 to 195,673 in 2015/16. (53,558 less WHM’s) in line with a 50% increase to the cost of the WHV. ($280 to $420) NZ received a corresponding increase in applicants over time, New Zealand’s visa fee remained constant.
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