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Australia turns cold on backpackers

December 30, 2016

For years, Australia has been a real paradise for working backpack tourists. But as of January 1, their income will be taxed at a new rate. Will this prompt the tourists to spend their vacations somewhere else?

Rucksacktouristen am Lagerfeuer
Backpackers on camp fire after a hard working dayImage: Fotolia/Alex Ishchenko

The arrivals board at Perth airport ticks over languidly - suitably emblematic of the insouciant zeitgeist of Australia’s westernmost city. Perth is the gateway for most European travelers who arrive "Down Under."

The European backpackers are easy enough to spot amid the hordes of fatigued faces. They're bronzed from a few weeks of sun in Southeast Asia en route to their working holiday in Australia. Their wrists, ankles, and earlobes are decorated with the sort of wooden jewelry found in the hawkers' stalls of Koh Samui and Lombok.

Australien Backpacker
Most of Australia's backpackers are from EuropeImage: Getty Images/AFP/G. Wood

Two young women are walking through the terminal - both taller than average, both fair-haired (freshly braided), and both sporting sensible Teva sandals. Anke and Jana are friends from Heilbronn in southwestern Germany. They're about to kick off what they hope will be the trip of a lifetime: a working holiday trekking through the immense expanse of Australia. They plan to finance it by working odd jobs as diverse as waiting tables and picking oranges.

“Yes, I did hear a little of the backpacker tax issues,” Jana says warily. “It was all over social media – people saying ‘don’t come anymore, it’s not worth it any longer.' For us it was now too late to change our itinerary, but I think those after us may reconsider coming to Australia, now it seems not as welcoming...”

Pick of the crop

Australien Backpacker Steuer im Parlament Canberra
Debate on the backpacker tax in the Australian parliamentImage: picture-alliance/dpa/M. Tsikas

The "backpacker tax," as it became known in Australia, was a bad-news story that the stalling economy just didn’t need. Australia's economy was already slowing down, so the announcement of a tax-increase on working backpackers was bound to be unpopular. Under the old system, they could earn up to A$18,200 (€ 12,800) tax-free. But last summer, the government announced that ALL of their income would be taxed. What's more, the tax would be raised to 32.5 percent - up from 19-percent.

But the plan backfired spectacularly, thanks to a massive lobbying effort by the farming- and tourism industries. Many Australian farms depend heavily on working holiday labor.

Charlie Armstrong of the Australian National Farmers’ Federation says: “The agriculture industry relies on backpackers to fill severe labor shortages, which are often seasonal and temporary - for example, when crops are being harvested or milk production is at its peak. Each year, backpackers contribute around A$3.5 billion (€ 2.4 billion) to the Australian economy, and around 40,000 find employment on Australian farms. Any further decline will only exacerbate the current trend of 12-percent fewer backpacker arrivals to Australia each year.”

Australien Weinernte
South Australia: Grape pickers at a wineryImage: picture alliance/Robert Francis/robertharding

The "backpacker crisis" has forced many growers to leave fruit on the trees to rot, because there aren't enough pickers. In any case, the number of working holiday-makers in Australia has been in steady decline for a number of years. It all started with an increase in visa fees in 2012, and grew worse with reports of the planned tax increase.

A recent survey by Tourism Research Australia found that, although the number of overseas visitors rose ten-percent this year, the amount of time that backpackers spent in Australia fell by seven-percent over the same period. Melbourne's Monash University found that 60-percent of backpackers surveyed in Australia between May and June of 2016 said that they would not have come to Australia if the new tax had been approved; they'd have gone to New Zealand or Canada instead.

Hand To Mouth

In early December, the government worked out a deal with the Green Party, and settled for a 15-percent flat tax on working holiday-makers who earn up to A$37,000 (€ 25,500) per year. Still, the deal eliminated the $18,200 tax-free threshold for these workers.

Bildergalerie Welterbe - Best of 4000 EINSCHRÄNKUNG
Tourist attraction Uluru (Ayers Rock) in the Central Australian desertImage: privat

Australias' farmers, regional employers and tourism operators welcomed the news. But some say the damage has been done. Australian Tourism Export Council Managing Director Peter Shelley says, “The word is out on the backpacker tax and we are beginning to see the signs of a change in demand from this market who are spending less time on our shores and therefore less money in our economy.”

The German backpackers Anke and Jana are relieved to learn about the new tax deal - and that starting on January 1, they'll have to pay 15-percent, instead of 32-percent. Anke has visited Australia once before, as a tourist. Now, she's concerned that a country famous for conversational pleasantries such as “no worries” and “g’day mate” may have pulled the welcome mat for working tourists.

Anke says: “Australia was once that place you always dreamed of, where the people were friendly, and you were always welcome. But I think that perception is now changing somewhat - well in Germany, anyway. Whether it’s refugees or backpackers, we hear more frequently that Australia is no longer so inviting, no longer so open and generous. I hope my time here proves this perception wrong.”