Scott Morrison says the Turnbull government will not compromise on its backpacker tax package and will be testing Labor’s proposed amendments in the Senate.
The treasurer has dismissed Labor’s call to cut the backpacker tax from 32.5% to 10.5%, saying it will cost the budget hundreds of millions of dollars.
He said the government’s proposal to cut the tax from 32.5% to 19% was good policy, and a greater cut would simply hand taxpayer dollars to foreign workers.
Labor announced on Tuesday it would support the government’s backpacker tax legislation if the government cut the tax to 10.5%. It also wants to scrap the government’s proposed $5 increase to the charge for all travellers leaving Australia.
The shadow treasurer, Chris Bowen, said Labor would move an amendment to the government’s bills in the Senate and if those two proposals were accepted Labor would support the rest of the government’s package.
He said the amendments would have to be passed by the House of Representatives, so some National party MPs would have to support them.
But the Nationals MP Andrew Broad told Guardian Australia that no one from the Nationals would vote for Labor’s amendments in the lower house.
On Wednesday Morrison said Labor was only playing politics on this issue and its proposed amendments would cost the budget $500m over four years. He said the Coalition would be testing the amendments in the Senate.
“They just want to drive a wedge in the House of Representatives and play politics with a very serious issue,” Morrison told ABC radio.
“What they’re saying is they want to give a bigger tax cut to foreign workers and ask Australian workers to pay for it. Who else is paying for it? It’s $500m where the budget goes backwards.”
The government’s proposal to cut the backpacker tax from 32.5% to 19% is an attempt to undo an Abbott government policy. In the 2015 budget the then-Abbott government proposed raising the income tax on working holidaymakers from roughly 13% to 32.5%.
A significant backlash from the agricultural industry, and members of the Coalition backbench, led to Malcolm Turnbull announcing a review of the tax in the leadup to this year’s election.
In September Morrison announced a planned 19% tax rate, with a $5 increase in the passenger movement charge to $60. To balance the package, the government also proposed to reduce the visa application charge by $50, increase the working holiday visa age from 30 to 35, and increase the time backpackers could work for one employer from six to 12 months.
The government has been promoting the proposed 19% rate as a tax cut. It also warns if Labor and the Greens do not support the legislation the tax rate will remain at 32.5% from 1 January.
“The common law position is if the Senate is unable to resolve this then it will default to 32.5 cents,” Morrison said on Wednesday. “Now I don’t want to see that. That’s why we’ve compromised.”
But Peter Whish-Wilson, the Greens’ Treasury spokesman, said there was no reason why that should be the case, according to advice from the parliamentary library and answers from Treasury and the tax office.
The Tax Office said last week if the government’s legislation did not pass parliament, a 32.5% tax rate would apply next year for non-resident holidaymakers.
