The increased tax on superannuation for backpackers has not been welcomed by the superannuation or agriculture industries, though there are differing views on the preferred measures.
The Australian Institute of Superannuation Trustees (AIST) is “concerned” the proposal to tax the Departing Australia Superannuation Payments (DASP) of backpackers at 95%.
“This rate will only apply to two categories of foreign nationals working in Australia, those on 417 or 462 visa subclasses or related bridging visas. All other categories foreign nationals who work temporarily in Australia will be subject to the existing DASP tax rate of 47% if and when they take their superannuation,” says the AIST submission to a Senate inquiry on the Bill.
“We believe that this is inequitable. Working holiday makers – commonly referred to as ‘backpackers’ – are only one of many classes of foreign nationals who are able to work whilst in Australia. In all cases, superannuation contributions must be made on behalf of eligible employees. However, the Bill seeks to charge only these visitors an increased rate of tax upon leaving Australia, and no others.”
“A tax rate of 95% on the deferred remuneration of this group of people will incentivise efforts to avoid paying superannuation, as well as cash-in-hand remuneration arrangements.”
AIST recommends that the Bill not be passed in its current form.
The increased DASP tax was also raised by a number of other submissions.
APAL (Apple & Pear Australia) asked the Senate committee to consider the impact the higher tax would have on backpacker numbers.
“The combination of 19 per cent tax plus 9.03 per cent (superannuation rate of 9.5% multiplied by 95%) means a backpacker tax rate is effectively 28.03 per cent. Australia competes in an international market to attract backpackers, and it is our understanding that many access these superannuation funds as they leave the country,” says the APAL submission.
Several of the submissions have called for backpackers’ superannuation to be used in regional projects.
“Seeking to retain the superannuation was the wrong approach by Government. It is the proposal of Fruit Growers Tasmania the superannuation is paid as normal, with the worker collecting it on leaving the country,” said Fruit Growers Tasmania.
“An alternative may be if the superannuation is collected by Government who can take a share of no more than 10% and returning 40% to the respective State to support regional projects, grants and industry work. The final 50% should be returned to the itinerant worker on departure from Australia.”
The National Farmers’ Federation also called for “redirecting superannuation paid to working holiday makers into regional employment programs”.
“Administering superannuation payments for individuals who have no intention of retiring in Australia has long been a frustration for the farm sector.”
“The alternative approach in this bill, which retains the red tape burden while effectively diverting superannuation away from working holiday makers, is not ideal.”
“We encourage government to consider how it can reduce the red tape burden of superannuation administration on the farm sector. One way of achieving this outcome would be to increasing the threshold for superannuation payments to align with the tax free threshold for working holiday makers, in line with the original intent of superannuation policy.”
The Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016 has already passed the House. The Parliament next sits on November 7.