New tax changes may increase illegal employment

Author: Annie Farrow Industry Services Manager, APAL 03 9329 3511

Annie Farrow
Industry Services Manager, APAL
03 9329 3511

APAL is concerned that new tax rules applying to temporary working holiday makers, 417 and 462 Visa holders, will create incentives that will cause workers and the contract labour firms that might manage them to work illegally.

In the 2015–16 Budget the Government proposed changes to the tax status of temporary working holiday makers from resident, to non-resident, from 1 July 2016. Treating working holiday makers as non-residents who will be taxed at 32.5 per cent from their first dollar of income. Temporary working holiday makers will no longer be able to access resident tax treatment, including the tax-free threshold, the low income tax offset (LITO) and the lower tax rate of 19 per cent for income above the tax free threshold up to $37,000.

Specifically, we are concerned that the substantial tax imposition will reduce the motivation to work legally. There will be an incentive for backpackers to seek employment “off the books” and to be paid in cash. Employers themselves may oblige because it reduces their paperwork. The change in the tax threshold could therefore encourage more employers into the black market for labour, a practice we do not condone.

The apple and pear industry relies heavily upon the temporary working holiday maker workforce. We do not have the ability to model the impact that this will have on the industry but simple mathematics would suggest that the impact could be significant as Australia becomes a less desirable place to work whilst holidaying.

For example, the unskilled casual wage rate under the Horticulture Award is currently $21.61 per hour. Assuming an eight hour day for six months a Visa holder could earn $22,474. Under current arrangements the Visa holder could retain all of this income for spending on living or holidaying within Australia or save to spend elsewhere upon departing the country. Under the proposed change that employee will have 32.5 cents per dollar taxed so that his or her income is reduced to $15,170.

For more information about the proposed tax changes contact Annie at 03 9329 3511 or

By |August 27th, 2015|Industry Issues, Labour / employment|

About the Author:

Industry Services Manager at Apple and Pear Australia Ltd (2009-2016).
For information regarding Industry Services contact APAL at or on 03 9329 3511.