Australia set to introduce controversial "backpacker tax"

Up until now, backpackers were not liable for tax until they exceeded a €12,800 threshold - in line with the rest of the country's workers

Australia set to introduce controversial "backpacker tax"

File photo: Outback travellers stop for a roadside coffee break on the highway to Darwin in Australia's Northern Territory. Image: Rob Griffith AP/Press Association Images

A controversial tax on backpackers working in Australia looks set to be signed off on this week.

The country's government originally wanted to bring in a 32.5% per cent flat rate on every dollar earned, but following a weekend of negotiations with opposition parties, the rate will reportedly now be set at 15%.

The lower rate was agreed after farming and tourism groups raised concerns the tax would make it unattractive to visit Australia using the county’s working holiday scheme.

Approximately 600,000 backpackers head to Australia every year, many finding seasonal work on farms around the country.

At the moment backpackers do not start paying tax until their income exceeds a threshold of Aus $18,200 (€12,800) - the same system that all other workers in the country fall under.

Farming groups had staunchly opposed the new tax and in September, the government suggested a compromise of 19%.

Opposition parties were holding out for a 10.5% flat rate which would have kept the country in line with neighbouring New Zealand.

Australian Treasurer, Scott Morrison said a compromise has now been reached,with the government now, "working to put in place a bill which will propose 15% on the backpackers' arrangement."

He said lowering the rate to 15% would cost the Australian budget $120m (€84.4) over four years.

With today’s agreement, it now appears the government has the numbers to steer the legislation through parliament this week.

However, opposition politicians are continuing to oppose the bill and are calling for a 10.5% tax, arguing Australia still risks turning away working holiday-makers and losing them to New Zealand and other destinations.

"When European backpackers look towards Australia and New Zealand ... all backpackers do is look at the headline rate," said opposition agriculture spokesman Joel Fitzgibbon.

“They look at New Zealand at 10.5 and Australia at 19 or 15 and they decide to go to New Zealand.”

The compromise has seen support for Australian Prime Minister, Malcolm Turnbull fall to its lowest level since he took office more than a year ago.

According to an opinion poll released today, support for Mr Turnbull had fallen to 46% by November 17th - a drop of 4% points from the previous survey in June.

Since taking power, a hostile upper house Senate, where Turnbull's conservative coalition failed to gain a clear majority, has fought him at every turn, leading political commentators to question how long he will survive as prime minister.