The Turnbull government has persuaded the Liberal Democratic party Senator David Leyonjhelm to support the backpackers tax at 15% after suffering an embarrassing Senate defeat on the proposal just minutes after the passage of legislation restoring the construction industry watchdog.
The government is attempting to claw back numbers for a 15% tax after Labor, the Greens and crossbenchers amended the rate of the backpacker tax to 10.5% on Wednesday morning.
The ambush prompted the finance minister, Mathias Cormann, to declare that the government would not accept the result, so the rate would revert to the original 32.5% on 1 January if the issue continued without resolution.
Cormann also declared after the vote that Labor had perpetrated a “cunning ploy” and would wear the backpacker tax issue like a “rose of crowns”.
The Senate had earlier passed legislation restoring the Australian Building and Construction Commission – one of the government’s triggers for the July double-dissolution election – after accepting a raft of amendments from various crossbenchers in late-night debate on Tuesday.
The government had been working round the clock to secure the positive ABCC vote, which was intended to close out the political year for Malcolm Turnbull on a high. The chamber then moved on to what the government anticipated would be a routine consideration of the backpacker tax legislation.
Last week opposition parties including One Nation combined in the Senate to lower the backpacker tax from the government’s preferred 19% rate to the Tasmanian independent Jacqui Lambie’s suggestion of 10.5%.
The government rejected 10.5% in the House of Representatives and later compromised again to set a 15% rate, which went through the lower house earlier this week.
During the Senate vote on the 15% rate on Wednesday, Labor secured support from the One Nation senator Rod Culleton, who broke with his party bloc to lower the rate to 10.5%. Lambie held firm to vote for 10.5%, as did the Justice party senator, Derryn Hinch.
After the vote Labor declared the Senate had spoken and the government needed to accept the verdict of the chamber. “The Senate has spoken not once, but twice,” the shadow treasurer, Chris Bowen, told reporters.
“This has been back to the House of Representatives and the Senate, the Senate has made it clear – the Senate has voted twice for a 10.5% tax rate, the Labor party and others, the fact of the matter is the government can’t get 19 or 15 through the parliament, so they should accept 10.5%.”
The shadow agriculture minister, Joel Fitzgibbon, predicted a Mexican standoff in the House of Representatives on Wednesday afternoon, where the government would attempt to blame Labor “for this chaos”. Fitzgibbon said if the tax reverted to the 32.5% it was “this government’s rate”.
“It’s obvious we can’t compete with other countries at 32.5%,” he said. “It’s clear now by the government’s own admission that we can’t compete at 19, and it was also clear to us that 15 is also too high. That’s what many, many growers were telling us.”
Hinch told Sky News he was intent on sticking to a 10.5% rate. “Right now I’m on 10.5%,” he said. “Right now I’m sticking to my guns.”
The senator said the government had tried to convince him to vote for 15% in the chamber but he had been intent on expressing his independence. “I’m not on the government’s side, I’m an independent senator,” Hinch said.
Culleton acknowledged after the vote that One Nation’s position was a tax rate of 15% but his own view was the tax should have been set at 10.5%.
