IRISH PEOPLE HAVE a love affair with Australia. We flock there in thousands every year whether it’s for necessity or a holiday.
Something may change a few travel plans going forward however. The Australian government have proposed bringing in a new tax that would see backpackers pay 32.5% tax on everything earned.
At the moment backpackers working in Australia on a Working Holiday Visa (WHV) share the same tax allowances as Australian citizens. This means they pay no tax on earnings up to $18,200 (€12,332) and pay 19% tax on income above that up to $37,000 (€25,068).
Under this new tax, backpackers will pay 32.5% on all earnings up to $80,000 (€54,245). The government says this tax will generate $540 million over three years.
Treasurer Joe Hockey said when announcing the tax as part of the budget:
We don’t want to increase taxes on Australians but we do want everyone to pay their fair share along the way.
This bill is not supported by everyone. Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, said the Australian government was penalising foreign workers because they were a “soft target”.
Bob Katter, leader of the Australian Party, is firmly against the tax, saying it is “absolutely disastrous” and “I don’t know how you’d man half the pubs or keep the banana industry alive”.
What to expect
I moved to Sydney in April on a WHV. I’ve had typical backpacker jobs: door knocking, call centres, labouring, etc. They pay for the bills and the schooners (beers).
The last thing anyone needs while setting up their new life is more hassle. If you’re moving to Australia this means opening a new bank account, figuring out how your Super (mandatory pension account) works, getting a phone network with the most international minutes, finding somewhere to live and getting your Tax File Number.
There’s plenty of accommodation in Sydney and, unlike Ireland, not everyone needs to sign the lease. Instead you pay a bond – essentially a security deposit – which you get back when you leave.
Rent is mostly weekly rather than monthly and you’ll find a nice place in one of the popular Irish suburbs (Bondi, Coogee, Randwick) for around $300 a week.
The minimum wage is $17.70 (€12.00) an hour so it’s not bad. Most backpacker jobs pay between $23-$27. But the cost of living can be incredibly high.
Take a labourer working 40 hours a week at $27 per hour. They earn about $1,000 (€677.85) a week. After tax (currently around $190), bills, food for the week and rent, they’re left with about $410 (€277.76).
Changes to the tax system
Under this new tax system, with the same bills and expenses plus the new 32.5% tax, the labourer is left with $275 (€186.41) for the week. That doesn’t leave a lot of wiggle room to save for travelling, the reason many come to Australia.
At the time of writing, a WHV from the Australian Embassy in Dublin costs €315. Together with flights, it’s about €1,000 to get here. How long your savings will last a while depending on how often you go out. According to Expatistan.com, an average meal for two to an Italian restaurant in Sydney costs $106.
To pay all that to come over and be left with less than €200 a week makes you ask, is it worth it? As attractive as Australia is, Canada, New Zealand and America are all equally viable options and don’t have the work restrictions that Australia have.
Why not apply for higher paying jobs? Well, as part of the WHV you are not permitted to work with one employer longer than six months without sponsorship. Sponsorship costs an employer a couple of thousand dollars.
So if there’s the option of hiring an Australian citizen or backpacker whose equally qualified, it’s simpler and cheaper to employ the Australian. Call centres and construction have high staff turnover rates so they are easier to get work in.
Uncertainty
Some reports suggest that the tax is postponed pending a review in mid-October and would be implemented on 1 January 2017. This has not been confirmed though and the confusion around it hurts one group more than any other – the horticulture industry.
If you want to stay in Australia past one year you have to either get sponsorship from an employer or complete 88 days farm work.
This scheme was originally put in place to get backpackers to do the work young Australians are unwilling to do. Most end up doing fruit picking or traditional farm work.
Farm owners are dependant on these backpackers every year and fear the number of backpackers coming to the country may drop because of this tax. There’s also concern over the confusion of when the tax comes into effect as they’ll be liable if they’re not paying correct tax for workers.
I know this piece sounds all doom and gloom. But Australia is still a great country to see and travel around. It’s still the only place to see the Great Barrier Reef, Uluru, Sydney Opera House, wild kangaroos, the Great Ocean Road and much more. I would still encourage anyone to brave the long flight and see this country.
All conversion rates correct at time of writing.
Robbie is a freelance journalist and recent graduate of Griffith College Dublin living and working in Sydney.
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