Government backs down on 19% tax after National MPs break ranks, with Pauline Hanson declaring compromise ‘a win for farmers, small business and tourism’

This article is more than 3 years old

This article is more than 3 years old

The Turnbull government has agreed to set the backpacker tax at 15% after a weekend of wrangling with key Senate crossbenchers.



The treasurer, Scott Morrison, told reporters on Monday the government would compromise at 15% to enable the parliament to move on from last week’s political impasse, which would have seen the rate go to 32.5% on 1 January if left unresolved.

The bill stalled last week after the Tasmanian independent senator Jacqui Lambie won support from Labor, One Nation and the Greens for the tax to be set at 10.5%.

Last week the government declared it was unwilling to compromise on the proposal but at the weekend the Nationals began to break ranks. The Nationals MP Andrew Broad said he would support a 15% tax rate compromise just to get the bill passed this year.

The backpacker tax is a textbook case of how not to develop policy | Greg Jericho Read more

“Parliament mustn’t adjourn until we deal with it, the politicians cannot go into a Christmas break with a tax rate of 32.5% – this would undermine workers for horticulture,” Broad told the Weekly Times on Sunday.

A spokesperson for One Nation said last week if the 10.5% tax rate did not pass, the party would be prepared to accept a higher rate of between 12% and 15%.

Morrison said on Monday the government could accept a 15% rate, which will cost the budget $120m over four years, and the treasurer said the government would honour undertakings it made last week to crossbenchers to win their support for the measure.

“In this parliament, the 45th parliament, it’s about what you get done,” Morrison said.

Morrison phoned the One Nation leader, Pauline Hanson, on Monday morning to say the government would accept 15%. He described that conversation as warm and convivial. “I wished her a merry Christmas, as she did me.”

Hanson declared Morrison’s compromise “a win for farmers, small business and tourism but this is also a win for One Nation and a win for common sense”.

“Instead of letting lobbyists and special interests groups dictate policy, politicians should be visiting their voters and listening,” Hanson said.

While the government appears to have the numbers to get 15% through the parliament if One Nation, the Nick Xenophon Team bloc and Derryn Hinch hold firm, it is not yet clear whether Lambie will accept it.

Nick Xenophon (@Nick_Xenophon) Backpacker tax breakthrough: Great news for Aussie job seekers too, as govt backs NXT plan to allow them to earn up to $5k without penalty.

The government has agreed with the NXT to trial a plan where welfare recipients would be allowed to earn up to $5,000 picking fruit without losing benefits.

A spokesman for Lambie said she was seeking further details on the proposal and would consult growers in Tasmania before coming to a final position.

Labor said on Monday it would stand firm at 10.5%. The shadow agriculture minister, Joel Fitzgibbon, said a tax rate set at 15% was “just a flip of a coin”.

“There has been no research or modelling done,” he said. “It is an arbitrary figure and this government stands condemned still for selling out our farmers and putting some of their own interests around Senate negotiations in front of the interests of the country and our farmers.”

George Brandis under pressure on Gleeson row – politics live Read more

Earlier in the day Morrison told reporters the onus was on Labor to make up the $120m budget shortfall as a consequence of setting the tax at 15%, but the shadow treasurer, Chris Bowen, said the opposition didn’t intend to take lectures from the treasurer.

Bowen said Morrison had delivered a “petulant” performance at his press conference on Monday morning. He said “the Labor party could go jump and he is clearly not interested in a proper and sensible discussion in this 45th parliament”.

Bowen said Labor would assess any future savings proposals on their merits.

The Greens attacked the deal. The Greens treasury spokesman, Peter Whish-Wilson, said the combined new tax rate of 15% from the first dollar earned, plus a new 95% tax on all superannuation paid by backpackers, would leave Australia at a competitive disadvantage.

“The Senate really should not be supporting this proposal on a 15% backpacker rate,” he said. “With the 95% clawback on superannuation of backpackers then the effective tax rate is closer to 24% which is no longer competitive with our neighbours.

“This is roughly double the effective rate of tax paid by working holidaymakers in New Zealand. We are seeking advice on whether we can move an amendment to this new bill to cancel the superannuation clawbacks.”

The Justice party senator Derryn Hinch said he would support the 15% rate but he was surprised the government had shifted.

Hinch told reporters on Monday Morrison had told him at the prime minister’s Christmas drinks on Sunday evening that “it would cost too much money if it dropped to 15%”.

“Something obviously happened in the interim so ... that is that.”

Hinch argued that the whole saga had been blown out of proportion. “I honestly believe it is a storm in a teacup in one way apart from the poor bloody farmers and their fruit,” he said.

“When you are a backpacker you wouldn’t have a clue what the bloody tax is. You don’t say I am not going to the Great Barrier Reef and Ayers Rock because [Australia’s] backpacker tax is higher. I’ll go to Iceland.”

The government started in the 2015 budget with a proposal to tax backpackers at 32.5% then dropped the rate to 19% after an outcry from farmers groups and horticulturalists.