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Govt unable to pack up backpacker tax

AAP logoAAP 24/11/2016

THE BACKPACKER TAX SAGA:

The government originally wanted backpackers picking fruit in farms across the country to pay taxes at the rate of non-residents at 32.5 per cent for every dollar earned but has cut it to 19 per cent.

SO WHAT'S THE BIG DEAL

Farmers are worried the 32.5 per cent rate would drive away the labour they need for harvest season. No workers could mean spoilt fruit and higher prices at the supermarket.

The problem has been compliance with backpackers self-assessing and claiming to be residents, thus minimising their tax or not paying any at all.

WHAT'S HAPPENED SO FAR

Labor and independent senator Jacqui Lambie teamed up to cut the rate to 10.5 per cent, saying it's better for farmers. It passed the Senate, but the government used its numbers in the House of Representatives to reject it.

WHAT HAPPENS NOW

There are a number of scenarios:

- If the bill goes back to the Senate, the upper house can "insist" on its 10.5 per cent or change it, with the bill ping-ponging between the two houses without resolution.

- The government could capitulate and agree to 10.5 per cent in the Senate.

- The government wins support for 19 per cent if One Nation changes its mind.

- Labor and the government reach an agreement on a rate between 10.5 and 19 per cent.

- If the government gives up, the status quo will prevail and backpackers will be able continue to self-assess as residents and pay no tax.

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