Australia budget could scare away backpackers

Backpackers live and travel on the cheap so they can holiday longer in Australia

Backpackers and others could now face higher income taxes thanks to changes in work rules in the Australian government's latest budget.

People on working holiday visas would now have to pay tax on every dollar they earnt, said Treasurer Joe Hockey.

The backpacker industry said the Treasurer had exaggerated how much money it could raise from the tax.

However, it warned publicity about the changes could scare away young tourists.

Young travellers from the UK, Europe and increasingly from Asia often get low-paid jobs in Australia's hospitality or farming sectors to fund their holidays.

Budget savings

Foreigners on working holidays currently pay no income tax in Australia until they earn close to A$20,000, the same tax-free threshold enjoyed by residents.

"Anyone on a working holiday in Australia will have to pay tax from their first dollar earned," said Mr Hockey.

"This will save the budget A$540m," he added.

Under the new rules that take affect in July 2016, for tax purposes they will now be considered "non-residents" and pay tax on every dollar they earn.

Young travellers often find work picking fruit to fund their travels

But Backpacker Operators' Association New South Wales Secretary Robert Henke said people on working holidays only benefitted from the tax-free threshold if they remained in one location for six months.

'Beat up'

He said anecdotal information showed most young travellers moved around, and worked in different places.

"It is a bit of a beat-up because what they didn't say is that to be entitled [to the tax-free threshold], you have to be in one spot for six months," Mr Henke told the BBC.

"So, we don't think the tax change will raise as much money as Mr Hockey claims," Mr Henke said.

"However, the unfortunate part of it is that overseas media are already writing articles that might frighten backpackers away," he said.

Others in the tourism industry were also unhappy about the announcement.

"Taxing working holidaymakers from the first dollar they earn, instead of giving them equal treatment with other resident taxpayers, is a backward step and will damage Australia's international reputation," said Tourism and Transport Forum Chief Executive Officer Margy Osmond.

"Australia has long been a favourite destination for young people from around the world who live, work and travel here for up to two years, and who spend on average more than A$13,000 during their stay," she said.