A fairly easy “gap year” option for university students is to get a Holiday Work Visa, fly down to Australia and do temp work. Common work is the restaurant/bar scene, farm work or other short-term work. If you’re extremely lucky, work might pop up somewhat related to your degree. The best part of working down in Australia is you earn your wages tax-free. Well, for now…
Things are changing soon, unfortunately. This summer, Australia is finally implementing the long-discussed “Backpacker Tax.”
Quick 4 points about the Backpacker Tax
- Meant for “holiday workers” in Australia (Holiday Work Visa holders)
- Income tax change from 0-19% to a flat 32.5%
- Goes into effect July 1st, 2016
- It sucks.
How You Earn $$ in Australia Today
Australia’s minimum wage is AUS $17.29 (~ $12.30 USD). At $17.29 hourly, you’d get $656.90 for a 38 hour work week. If you manage to stay under $18,200 for the year, then you are taxed at %0 — Nice pizza money for when you return to school, not to mention the stories of having travelled far and wide to make it.
How You Will Earn $$ after July 1st, 2016
At the same wage, $17.29 hourly, your week’s salary of $656.90 becomes $443.40. Instead of earning $18,200 for the year, it’s now $12,285. So, yeah, that sucks.
What’s This Mean for Australia?
Implementing this tax will cause 2 big changes, one local, one international. The local one is a budgetary surplus of approximately half a billion AUS$. The AZ government guess-timates about $540 million will be gained from all the new tax money from the non-resident workers (a.k.a. backpackers). Nice for them.
I see a fallacy there. The $540m forecast is based on past non-resident workers. Well, there’s the fallacy (when you base a forecast on past results without considering how the new policy will impact the forecast.) The second big, international change is Australia’s reputation. The destination won’t look so attractive to future backpackers, given their first dollar is taxed at 32.5%. So, the cause-and-effect is: Aus raises taxes, backpackers stop pouring in, taxable dollars go down. Bad for them.
Good-Bye Fruit Pickers. Hello Heavy Industry
It doesn’t take a brain surgeon to see how the impact favours industry. It doesn’t even take a fruit-picker.
Fruit-picking is one of those low-paying jobs that any Working Holiday Visa holder could get. It’s not about the money, it’s about the experience. You often get free accommodation, fresh air and the whole experience of fun farm livin’!
But given this new tax, WHV-holders will seek alternatives. Farmers will feel that the most. Farmers will have fewer fruit-pickers. I’ll bet in not too many years, farming in Australia will trend quickly from many, small farms to fewer ‘industrial’ farms. Just a thought after asking the question “cui bono?“