The Federal Government has conceded its own proposed foreign backpacker tax could damage Australian agriculture and tourism.

The change will see foreigners on working holiday visas taxed 32.5 cents from the first dollar they earn, and a scrapping of the $18,200 tax-free threshold.

Tourism Minister Senator Richard Colbeck told the ABC he would head a cross-departmental review of the tax.

"Legitimate concerns have been raised about the impact the so called backpacker tax would have on our global competitiveness as a backpacker destination," Senator Colbeck said.

"The backpacker workforce is vital to two of our key super growth sectors — agriculture and tourism.

"We have therefore decided that the proposed tax arrangements require further discussions to ensure Australia does not lose market share in backpacker visitation.

"We will work to prepare a revenue neutral proposal in consultation with Employment, Immigration, Agriculture and Industry Ministers that can be presented to the Treasurer for consideration by Cabinet in relation to the measure."

He said backpackers would still be taxed but the committee would look at other measures to ensure there was no negative impact.

"The key issue is to ensure we have a balanced and equitable approach to the tax status for workers here on visas," Senator Colbeck said.

Last month the ABC revealed that moves were underway within the Federal Coalition to find a compromise on the tax, amid concerns about the impact it would have on the agriculture industry.

Some rural MPs, including Liberal Member for Murray Sharman Stone, questioned whether the proposed tax would generate the full $540 million forecast by Treasury over the next three years.

"It is the harvest-dependent international backpacker scene that we want to see continue and not suddenly disappear," Dr Stone said in February.

"We've looked at what the tax take might be as a contribution to the budget, but if we have fewer backpackers arriving that tax take is a lot less when calculated."

Farmers also expressed concerns about the tax, warning crops would be left to rot if their backpacker workforce dried up.