The Federal Government’s proposed changes to backpacker tax legislation have been a rollercoaster of emotion — starting with an insanely draconian 32.5 cents in the dollar tax that had everybody in the industry speechless with shock, and now finally grinding to a halt with a series of so-called “compromise” changes that continue to utterly miss the point.
Backpackers to Australia will now pay tax at 19 cents on the dollar, which is much more reasonable than an unworkable 32.5 cents. We’re pleased to see that Morrison and Turnbull have been reading the letters we’ve been sending them, in which we pointed out that it made more sense to tax everyone equally regardless of where they come from.
Unfortunately it seems like the rest of our suggestions fell on deaf ears. None of the announced changes even begin to acknowledge the core problem at the root of backpacker exploitation: the near-absolute freedom of labour hire agencies to bypass the tax system entirely by signing backpackers up with ABNs and treating them like contractors.
Every day in the agricultural sector
The agricultural sector is rife with exploitation, whether it’s fruit pickers in Tasmania or meat workers in northern NSW. Under the current system, corporations from all across the sector (many of whom pay little or zero tax) have every incentive to look the other way and not concern themselves with the conduct of the labour hire agencies who staff their plants or fields with underpaid, exploited workers.
There are negligible consequences for companies who engage labour hire agencies that provide them with exploited workers, and every incentive to continue doing so because it keeps costs down and profits up. It is now painfully clear that our dear Treasurer and Prime Minister are either somehow ignorant of the reality of labour hire agency exploitation in Australia, or wilfully avoiding a genuine solution for fear that it will upset their rich donors.
We acknowledge the efforts of Labor in Queensland and Victoria, as well as on a Federal level to take action on this issue – most recently with Labor’s pre-election proposal of a licensing system for labour hire agencies. But it’s not enough, because once again it only attacks the symptoms, and not the cause.
Meaningful changes are needed
There is only one way to solve this problem, and it’s something we’ve been saying for years: all visa holders must be required to hold a Tax File Number and be taxed and tracked as a regular Australian citizen.
As long as ABN options are available to visa holders, dodgy labour hire agencies will exploit them to create a black market of sham contracting that allows them to offer cheap workers en masse to large corporations. In fact, with the signing of the China Free Trade Agreement, this situation is about to become a lot worse.
ABN holders don’t pay superannuation, so clawing back 95% of nothing will give the government nothing. ABN tax reporting obligations are few and far between, so adjusting the tax rate to 19% on those few backpackers that choose to take out a Tax File Number will make no practical difference.
Morrison also proposes that backpackers change either their location or employer every six months to keep their visa — we can tell you from our own numerous successful underpayment claims that there are dodgy labour hire companies who have used five, six or even seven different company names. “Changing your employer” isn’t difficult when your employer voluntarily changes their own name every second Wednesday in order to stay one step ahead of the law.
It doesn’t matter what tax changes are put in place — none of them will make any difference to the real lives of workers unless this fundamental loophole is addressed.
We also urgently call on all sides of politics to implement Joint Employment Legislation so that principal companies who engage dodgy labour hire agencies actually have some meaningful incentive to make sure they don’t take advantage of exploited visa holders.
Real and genuine action that attacks the cause, not the symptom, is urgently needed. We call on all parties involved to reject these backpacker tax changes and move towards a fairer solution for the hundreds of thousands of visa workers who help put food on our tables every day.