Tourism, farming sectors helped form lower backpacker tax

The report, obtained by The Australian Financial Review, informs the Department of Agriculture and Water Resources about engagement with stakeholders on changes to working holidaymaker visas originally announced in the 2015 budget, which proposed non-residents on such visas be taxed at a rate of 32.5 per cent from their first dollar of income.

When Treasurer Scott Morrison announced a compromise package this week, he faced criticism from Labor and the Senate crossbench that the new 19pc tax rate would mean Australia was uncompetitive with other markets seeking to attract young holidaymakers.

According to the Deloitte report, a comparison of the regime with New Zealand, the United Kingdom and Canada shows the new regime is only slightly less attractive than NZ, while remaining ahead of Canada and the UK.

But it notes stakeholder submissions argued other aspects of the current visa arrangements placed Australia at a competitive disadvantage, including higher visa charges and the fact both the UK and NZ programs allow participants to live and work for up to two years.

Other countries do not put a limit on the time that can be spent with a single employer.

This week's restructured package addressed most of these issues.

The report says "stakeholders across the country put forward alternate taxation options".

"Of the proposed alternatives, 15pc and 19pc were the two most common preferred tax rates if a non-zero rate were to be adopted," the report says.

"Any tax rate of 19 per cent or under would be far more widely accepted by those with whom we consulted and 19 per cent was viewed as the highest tax rate the industry could take before they became uncompetitive with NZ and Canada.

"Stakeholders estimated under certain assumptions that a tax rate of 19 per cent would still raise approximately $325 million a year for government."

The report also appeared to clear the way for the government's decision to claw back superannuation entitlements, noting "the majority of this superannuation is not claimed by working holidaymakers upon exit".