Senate debates

Thursday, 24 November 2016

Bills

Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016, Treasury Laws Amendment (Working Holiday Maker Reform) Bill 2016, Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016; In Committee

12:23 pm

Photo of David LeyonhjelmDavid Leyonhjelm (NSW, Liberal Democratic Party) Share this | | Hansard source

Last evening, as a result of some rearrangements in speaking orders and some confusion over quorums and so forth, I failed to deliver my contribution to the second reading debate on this package of bills. Before getting into amendments, I would like to deliver my speech in order to have it on the record.

The bills before us today propose to introduce a new tax regime for backpackers, whereby they are taxed at 19 per cent from the first dollar they earn. This begs the question, how are these backpackers taxed under current law? And how would they be taxed if the bills fail to pass?

That depends on what you read, who you listen to, and when. Suppose you listened to the government in 2015 when they first announced special backpacker tax arrangements. In its budget of that year, the government said it was changing:

the tax residency rules to treat most people who are temporarily in Australia for a working holiday as non-residents … Currently, a working holiday maker can be treated as a resident for tax purposes if they satisfy the tax residency rules, typically that they are in Australia for more than six months. … This measure is estimated to have a gain to revenue of $540.0 million over the forward estimates period.

From this, you would think that a lot of backpackers are treated as residents and enjoy a tax-free threshold like other residents, paying zero tax until they reach the threshold. After all, the government thought it would raise $540 million over the three years to June 2019 by changing tax law to treat most backpackers as non-residents. This would not be possible if they were already non-residents.

This estimate was not just a guess from the Treasurer. It was produced by Treasury in intimate consultation with the Australian Taxation Office, which regularly deals with these backpackers. If you want to know how backpackers are taxed under current law, you could also read the Treasurer's media release in September this year, when he watered down the government's proposal to tax at 32.5 per cent from the first dollar. He announced instead that a 19 per cent tax from the first dollar earned would apply where the employer is registered to employ backpackers and a 32.5 per cent tax on the first dollar earned would apply where the employer is not registered. The media release indicated that this watering down would reduce the expected revenue gain in the three years to June 2019 by $200 million, so the Treasurer still expects his special backpacker tax arrangements to raise $340 million in extra revenue over the three years to June 2019. Again, such a boost to revenue is only possible if a lot of backpackers are currently treated as residents and enjoy a tax-free threshold.

If you want to know how backpackers are taxed under current law, you could also read the tax office's statement on its website in September after the Treasurer watered down the government's proposal. In that statement the tax office said working holiday-makers 'will no longer be entitled to claim the tax-free threshold.' That sounds a lot like the tax office suggesting that working holiday-makers are currently entitled to claim the tax-free threshold.

All of this suggests that the bills before us today represent a substantial tax increase. The funny thing is that, once Labor signalled that they would not wave through these bills, crossbenchers being wooed to vote for the bills started being told that the bills actually represent a tax reduction. We were told that, if the bills before us today did not pass, from January 2017 the tax office would treat backpackers as non-residents even though the age-old definition of 'resident' in tax law remains untouched. Lo and behold, the tax office put out a media release in November offering the view that most working holiday-makers are non-residents.

This threat to treat backpackers as non-residents under the current law seems flimsy. It is true that the Administrative Appeals Tribunal decided last year that three particular backpackers should be considered to be non-residents, but these three backpackers are in no way representative of most backpackers that come to Australia, so there is no basis for the tax office to say now that all or even most backpackers are non-residents. The law says you are a resident if you meet just one of four criteria, but each of the three backpackers agreed they had no claim to residency under three of the four criteria. Each claimed residency solely on the basis of being present in Australia for six months and not having a usual place of abode in a particular place overseas. But each of them lived in their parents' houses before and after coming to Australia. They only stayed in Australia for between six and 10 months, in line with their prior intentions. Each had minimal assets in Australia. They spent no more than half their time in Australia in employment. They each seemed to have stayed in 20 or more places while in Australia. One even claimed to be a non-resident in correspondence with the tax office, and the other two used their parents' address for at least some correspondence. Because of all this, each of the three backpackers was found to have a usual place of abode in a particular place overseas: their parents' home.

In contrast, many and perhaps most backpackers will not so clearly have a usual place of abode in a particular place overseas, or they will claim residency under one of the other criteria. Given the unrepresentative nature of the three backpackers deemed to be non-residents by the Administrative Appeals Tribunal and given that the government is banking on its bill significantly increasing revenue, it seems clear that many and perhaps most backpackers are residents for tax purposes and will pay considerably more tax if the bills before us today pass.

This would not necessarily mean I would vote against the bills. It may come as a surprise, but I do not mind the imposition of extra taxes on foreigners. After all, the Liberal Democrats' immigration policy is to limit immigration by imposing tariffs on migrants who meet our character, criminal and health requirements. This will allow us to do away with bureaucratic quotas and selection criteria under the family reunion and skilled programs. No tariff would be imposed on refugees, for whom a generous tariff would remain.

What I do mind is imposing extra taxes on foreigners to such an extent that it ends up hurting Australians. I am concerned that a 19 per cent tax from the first dollar may encourage backpackers to take their working holidays in lower-taxing jurisdictions like New Zealand. This will be bad because Australians are better off when backpackers come here. More work gets done, and backpackers impose a negligible cost on taxpayers because they do not have access to services like public schools and hospitals.

The government argues that increasing tax on backpackers will not discourage them because the jobs on offer in Australia pay a high wage. The problem is that there are not enough jobs. Our minimum wage laws mean that, yes, our employers are forced to offer high wages for menial tasks, but they respond to this by not offering many jobs. If this parliament can resist the temptation to increase tax on backpackers, and if we also reduced our minimum wage, then we would see more backpackers come to Australia to work in menial tasks for the benefit of Australians. If we combined a reduction in our minimum wage with a reduction in the availability of welfare, we could see many currently unemployed Australians take up these menial tasks as well. In summary, I believe that the bills before us today are likely to discourage backpackers from coming here for our benefit, particularly if we are able to constrain our minimum wage. As such, I will oppose these bills.

There are other reasons why I oppose these bills. These bills also increase the tax on the superannuation of backpackers to a whopping 95 per cent. They increase the passenger movement charge, giving us one of the highest, most anti-tourist departure taxes in the world. And they do the bidding of unions. The bills deliberately set out to make the hiring of backpackers markedly harder than the hiring of locals. If a farmer wants to hire a backpacker he or she will have to demonstrate a genuine business requirement to hire backpackers. They will have to promise to examine the visas of backpackers and confirm that the visa allows the work to be done. They and any associates will have to pass a vague fit-and-proper-person test. If the farmer fails to navigate this bureaucracy, he faces a fine of up to $10,800. Unsurprisingly, the government admits that this may disincentivise the employment of working holiday-makers.

What is worse, the bills set the unions on any farmer brave enough to hire backpackers. The bills mean the government will publicly disclose the name and location of any farmer who has successfully navigated the bureaucracy and intends to hire backpackers. These details will appear on the Australian Business Register. The government says that this will make it easy for working holiday-makers and others to check the registration status of a potential employer. Given that backpackers are not known to regularly peruse the Australian Business Register, this outing of farmers who plan to hire backpackers will mainly help the Australian Workers Union to wage a campaign of harassment and intimidation. Some farmers support these pro-union the provisions. Rather than continue to resist union harassment and intimidation, they now just want to make sure that their competitors face union harassment too. In effect, the farmers who support these provisions are happy to see fruit go to rot as long as everyone else is in the same boat.

Why the Liberal and National parties are instigating such pro-union provisions is anyone's guess. Perhaps they think the farmers who support them are representative. Perhaps they have fallen for the Labor claims that when backpackers work hard at agreed rates they are being exploited instead of offering a shining example for others. Or perhaps the Liberal and National parties are asleep at the wheel and letting the red-tape-loving bureaucrats draw up laws without oversight.

But perhaps the strangest pro-union provision in these backpacker tax bills has nothing to do with backpackers at all. For the first time in Australia's history, these bills will authorise the tax office to divulge the private financial details of employers who are fully compliant with the tax laws to the Fair Work Ombudsman, so that she can enforce government decrees on wages, including minimum wages, award wages and penalty rates. It is well known that government wage setting is ignored by a number of employers and employees. This is a good thing because it gets more people into jobs and benefits the economy. But now this new provision will ensure government wage setting is enforced with an iron fist, with terrible consequences for employment.

That the tax office coercively extracts the financial information of taxpayers is a concern, but at least it has always kept this information secret. Divulging the information to more and more tentacles of government is a huge breach of trust that will substantially undermine taxpayer cooperation with the tax office. With their backpacker tax bills, the Liberal and National parties are raising revenue, discouraging backpackers to the detriment of Australians and doing the bidding of the unions. Accordingly, I oppose each of these bills and I hope the government's efforts to pass them into law fail miserably.

12:35 pm

Photo of Richard Di NataleRichard Di Natale (Victoria, Australian Greens) Share this | | Hansard source

I rise to speak to the working holiday-maker reform bills. Firstly let me say the government has made another mess of this. They have the reverse Midas touch at the moment. They are inept and misguided at handling anything that comes their way, and that is what happens when you are obsessed with all of these penny-pinching revenue measures. The problem here is that while the government is ignoring risks to Australian businesses that rely on working holiday-makers, and particularly agricultural producers, they are creating huge uncertainty within this industry. I speak about this now because I was denied the opportunity to do it during the second reading debate.

I just want to talk a little bit about the history of what happened here, and that was that the government first had this thought bubble of a backpacker tax in the 2015-16 budget. They did not talk to anybody about it. It came out of the blue, and of course the agricultural sector were outraged when they were confronted with this. The government did nothing about the tax for the duration of 2015-16. It was absent from the 2016-17 budget. Then, under pressure during an election campaign about what they were going to do with all of the uncertainty created, they announced a review and pushed the issue off into this parliament. Now we are here, being asked to mop up the mess.

What they have come up with is a revised backpacker tax at 19 per cent. We have sort of entered this dutch auction when it comes to the tax rate for backpackers. But what it does not do is answer the fundamental question of why backpackers should not be afforded access to the tax-free threshold in the same way as Australian residents. We have had people like the Deputy Prime Minister, Barnaby Joyce, running around the country saying we should not have backpackers taxed less than Australians. Well, there is a very simple response to that: let's just tax them like Australian residents. If you do that, everybody plays by the same set of rules.

If we were to give backpackers the same opportunity to be taxed as Australian residents, they would be afforded access to the tax-free threshold. What that would enable us to do is to maintain our competitiveness with other countries, which means that backpackers will choose Australia instead of other countries. If we do not do that, if we do not remain competitive in this area, then Australian agricultural businesses are going to lose out.

The story of Timothy Reid, the Managing Director of Reid Fruits in Tassie, was an interesting one when he presented to the Senate Economics Legislation Committee earlier in November. His view was:

Those kids come here at the moment and go away as ambassadors for our product.

Senator McKenzie interjecting

Senator McKenzie might not care about Tasmania. The government might not care about Tasmania after they were—

Senator McKenzie interjecting

I will take that interjection from Senator McKenzie. This is why the coalition were booted out of Tasmania, given a right royal boot up the rump. People said, 'Unless you actually start speaking out on behalf of Tasmania, we don't want you here.' If you listened a little bit more to people from Tasmania, Senator McKenzie, you would not have got the resounding electoral kick up the rump that you got.

This is what Mr Timothy Reid, the Managing Director of Reid Fruits in Tasmania, said to the Economics Legislation Committee:

Those kids come here at the moment and go away as ambassadors for our product. It is really word-of-mouth overseas from those backpackers that brings the backpackers back to us year, on year, on year. Up until now we have been getting increasing numbers of people applying for work in our businesses …

In the case of Reid Fruits we have seen a decline by 50 per cent this year in the number of backpackers who have applied for positions with us. We will scrape through this season; we have enough people to fill our positions so far. But I must say that a lot of those backpackers were already in Australia when this tax was announced, some of them on second-year visas. It is the next wave of applicants that we are worried about.

That echoes the concerns of many, many businesses right around the country.

The simple solution here is to treat backpackers like other Australian workers. Do not run this misleading campaign that somehow backpackers are getting an advantage over Australian workers—just treat them like Australian residents. Everyone is in then working on a level playing field. That way they get access to, basically, a tax rate of zero for earnings up to $18,200, just Australian residents, and then they are taxed at a higher rate thereafter. It would provide Australia with a competitive advantage and it would make sure that we have an essential source of seasonal labour for the agricultural industry.

The Treasurer himself said it: 'One of the great virtues of backpackers when they come to Australia is they leave with their pockets empty because they spend what they earn here.' This is money that is coming back into the Australian economy. It is money that helps farmers and that is spent on the Australian economy. Every dollar that a backpacker spends on meals or drinks at a pub includes the GST, so working holiday-makers are paying tax along the way, just like other Australians. Proposals from, for example, the Labor Party and Senator Lambie for a 10.5 per cent tax rate will charge backpackers at a lower marginal rate than residents for earnings between $18,000 and $37,000. On that point, we think the superior solution is to just treat backpackers as you would Australian residents.

I live in a rural community and I speak to farmers all the time. They are bloody angry. They are angry at the mess that this government has made of what should have been something that Australia should be trying to encourage. Instead, we are sending a message—and it is particularly galling that the party that says they represent farmers, that says they work in the interests of the agricultural sector, the National Party, are the biggest advocates of slugging a big tax on these workers, who help keep these farms going. Understandably, the farmers are angry, because this reform process is hurting their business. We are in very dangerous territory for some of these farmers, who face a great risk at harvest time.

And, of course, a whole lot of people who would be coming here as workers and as tourists are scratching their heads with confusion. You can see the conversations going on online. This is a community that speaks to each other through online forums saying, 'Look, we were thinking of going to Australia. It's not worth it now. Let's go to New Zealand—let's look for other destinations—and we'll give Australia a miss.' That is the danger here. We are going to hurt the tourism industry, we are going to hurt the agricultural industry and we are going to do in the name of penny-pinching. This was a mess. It was a bad idea.

Senator McKim interjecting

That is right, Senator McKim: it was a shocking idea. It was a shocking idea handled terribly. There is a simple fix. The simple fix that the Greens promote is to treat working holiday-makers who earn an income like every other person in this country; let us tax them at the same rate.

This is a government in serious strife. It is about time it started to listen not just to big business and to its mates at the big end of town but to those ordinary people who own farms and who rely on seasonal labour for their farms to succeed. Again, I say to the National Party: you need to start to understand that it is no longer acceptable for people in rural communities to be deserted by your party because you are more interested in supporting the interests of people like Gina Rinehart than the interests of people like Mr Tim Reid from Tasmania, whose business is so absolutely critically dependent on these people, who make a great contribution to Australia.

12:44 pm

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

I want to very briefly in the committee stage ask the minister a couple of questions, because this issue is particularly important to the state that I represent, Queensland, but even more importantly up to the north of Queensland where small crop growers, horticulture growers, banana growers and mango growers rely on foreign backpackers to pick their crops. I am disappointed to say that, with huge unemployment in Townsville and Cairns, particularly youth unemployment, we still cannot get unemployed young Australians to go and do this work—but that is a separate issue.

I agree with the previous speakers that, unless we have these foreign backpackers to do the work, the crops will rot on the tree or on the bush. It is a very big issue. And I do think, and I have said this publicly, that the budget measure announced by the government was a mistake and it cost us during the election campaign. I assured everyone who raised this issue with me that, as long as I had breath in my body, we would change what was then proposed. I am pleased to see that the government did subsequently do it.

I chaired the Economics Legislation Committee in the absence of the chairman when it met in Cairns. The general response from Cairns—which is the centre of the tourism industry in Australia, as we know, and which has a very big horticulture industry in the Cairns, Far North Queensland region—was that, whilst they would prefer the passenger movement charge not to be imposed, they did not think it was going to make a great deal of difference. A $5 charge on a $2,000 airfare to and from Australia was not going to be a big deal. I think this is important. If you look at the Hansard evidence, none of the tourism industry people in Cairns were terribly worried about that. The horticulture people were concerned about the 19 per cent, the 15 per cent and the 13 per cent that applies in different places.

I have a question for the minister on a matter that I do not quite understand and that a lot of my constituents have raised with me. In the past there was a tax-free threshold for foreign workers that allowed them to earn up to $18,000 and not pay any tax, and that is what attracted a lot of them to Australia. Just in a brief contact with the minister before, I did not understand—the minister just mentioned it, and I want him to elaborate on it—that there was a court case which changed that. I want to understand that and get the facts on why that doesn't apply. Most people in the north, in my state, still believe that is the situation. Minister, could you explain that to me. I understand this matter has to be dealt with today. I do not want to take up much time. I understand that, if it is not dealt with today, we will be having tax at 33 or 35 per cent—

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

and that means we will get no backpackers. So I understand the urgency. I do not want to delay the debate much further, but I am very curious about that, minister, and I know a lot of my constituents are as well.

12:48 pm

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

I thank Senator Macdonald for that question and for the opportunity to clarify the actual situation in relation to this. The reality is that a starting tax rate—that is, a tax from the first dollar earned for foreign residents working in Australia—has been in place in Australia since 1983-84. At the time, the initial tax rate was 29 per cent. It was the—

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

That was the Labor government.

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

No, that was actually the tail end of the Fraser government. It was the 1983-84 budget. So it has been in place since 1983-84. It was 29 per cent in 1983-84. It was increased under the Labor government, the Gillard government, by the then Treasurer Wayne Swan to 32.5 per cent in the 2012-13 budget. And as you know, under our legislation, we are proposing to reduce that to 19 per cent from 1 January 2017.

It is true that, if the legislation is not passed, the current rate of 32.5 per cent will continue to be the tax rate from that time. I also have to say that the $18,200 tax-free threshold for residents in Australia is only a recent development. It was increased quite substantially in the wake of the introduction of the carbon tax by way of carbon tax related compensation.

When it comes to foreign workers, the uncertainty that existed prior to the 2015-16 as to the status of backpackers, working holiday-makers, was whether they were residents or nonresidents. If they were treated as nonresidents, like any other foreign worker in Australia they paid tax from day one. The tax rate applied by Labor was 32.5 per cent. If they were treated as residents then they were able to take advantage of the same tax-free threshold arrangements as Australian taxpayers.

That was an unresolved issue back in 2015. The budget measure was designed to provide certainty and to resolve that issue. But around the same time as that measure was being discussed the Administrative Appeals Tribunal heard a number of cases which were handed down on 6 March 2015. Those cases confirmed that working holiday-makers invariably were nonresidents for tax purposes, and the tax office clarified it and provided certainty around the status of working holiday-makers as non-resident taxpayers and workers. In statements released by the tax office on 2 November 2016, the tax commissioner has made that very clear. He said:

We consider that most working holiday makers are non-residents due to their pattern of working and holidaying while in Australia.

We will help working holiday makers understand Australia’s self-assessment tax system, so that they correctly advise their employers of their residency status …

The implication of all of this, as you quite rightly pointed out, is that if this bill today does not pass or does not pass in a way that is acceptable to the government the consequence of that will be that the Labor tax rate of 32.5 per cent will apply to every foreign worker in Australia, including working holiday-makers. That will be the consequence.

We are proposing a sensible compromise which Liberal and National Party senators along with their colleagues in the House of Representatives worked on very hard with stakeholders across the sector to come up with. We are proposing to bring the rate down to 19 per cent, which we think is sensible. Obviously we have a fiscal challenge in Australia. Obviously we need to raise more revenue. I guess the implication of the proposition put by some that we should cut the tax further is that we would be cutting taxes for foreign workers and forcing taxes up for Australian workers or forcing deeper cuts in order to get the budget back into balance. We do not believe, on balance, that that is the right way to go. This is going to be my only contribution in order to facilitate the process.

The way this has been framed by the government, in close consultation with all relevant parts of the sector and in close consultation ,from the government's point of view, with Liberal and National Party members and senators in particular, has been to ensure that those holiday-makers coming to Australia have a better deal than if they went to New Zealand, the United Kingdom or Canada, for example. Indeed, under our government's changes, a backpacker earning $30,000 in Australia during their holiday would have $10,530 in their pocket after tax. Under similar working arrangements, take-home pay in Canada would be just $9,937. In New Zealand it would be $10,126. In the United Kingdom it would be $10,470. So when you look at the pure financials you will see that the arrangement we are proposing is internationally competitive.

Let me assure you as somebody who as a student came on a holiday to Australia—and, of course, I stayed!—that I came to Australia because of what a wonderful country Australia is. I did not sit there with my laptop trying to figure out what the tax rates were in Australia. It might surprise you, but I certainly did not think, 'What are the tax rates in Australia? Oh, okay. They are slightly better than in New Zealand or Canada. Let's go to Australia because they have a more competitive tax rate!' That is certainly not the way it worked for me. I put it to you that that is not the way it works for most holiday-makers. I think most holiday-makers come to Australia because of what a beautiful country Australia is. It is because of what a wonderful country Australia is. It is because it is such a great country to visit with such great opportunities and such great people to meet. Yes, of course, you have to be mindful that your tax arrangements are internationally competitive. We believe that what is on the table here is internationally competitive, and we commend it to the Senate.

12:55 pm

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Senator Cormann, you just said, 'This is going to be my last contribution.' I certainly hope that is not the case, because we have got to nowhere near the bottom of this yet. In your budget papers for 2015-16 you said:

Currently, a working holiday maker can be treated as a resident for tax purposes if they satisfy the tax residency rules, typically that they are in Australia for more than six months. This means they are 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.

Now, I understand that the AAT made a ruling on three cases, out of hundreds of thousands of backpackers who have come to this country. I also understand, from asking the ATO and Treasury myself during the Senate inquiry, that they do not actually have information on how many backpackers are currently residents for tax purposes and how many are not residents for tax purposes. I very clearly asked them to clarify whether it is technically correct of you and the Nationals and the farmers groups, out there championing your cause, to be claiming that the default position for all backpackers in this country is going to be 32.5 per cent. The clear answer was no, that is not the default position. Some backpackers in this country are legally entitled to have the same tax residency as Australians. It is black and white. They can go onto the ATO's website. There is a list of things there that they need to comply with.

I just wanted to clear up for anyone listening and for the Hansard record that this implication that has been put forward—and I would call it spin and BS—and that has been played out in this debate in recent weeks, including here in the last couple of days, and which is designed to frighten senators, MPs and farmers groups into accepting 19 per cent , is rubbish. I would like to know, from the ATO, what kind of work they have done in recent years on actually determining how many backpackers are residents for tax purposes and how many are not, and how many should be residents for tax purposes and how many should not. You said that 'invariably'—or some word to that effect—they are not. But my understanding is that there is no data on that.

I would also like to know, if this is the case, and Senator Leyonhjelm raised this in his speech, how it is possible, if the default rate is 32½ per cent and that is the rate they should be paying, that in your own budget—unless you have some sort of Enron-style accounting or you are a financial alchemist and can create money out of nothing—that a tax cut can create revenue in your budget. Could you address those two questions?

12:58 pm

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

Firstly, the cases that went before the Administrative Appeals Tribunal, as often is the case in relation to the interpretation of tax laws, were test cases. My advice is that they have clarified the accurate interpretation of the law, and the statement that the tax commissioner put out on 2 November 2016 could not be more clear. We considered that most working holiday-makers are nonresidents due to their working and holidaying while in Australia. As such, the expectation would be that most holiday-makers, if this law is not passed in the form that the government is putting forward, will end up paying 32.5 per cent tax from the first dollar earned. We are proposing to make that 19 per cent.

The senator asked about data. The reality with the tax office is that the ATO is very much backward looking. You are quite right, Senator Whish-Wilson: in the end it does come down to individual circumstances. If somebody comes to Australia on a working holiday, so called, and properly settles in a particular way and makes Australia their residence for residency purposes and is not using the usual pattern of a working holiday-maker with their residence overseas, then there will be different circumstances. On 2 November the tax office made it very clear, again, that it considers that most working holiday-makers are nonresidents but due to their pattern of working and holidaying while in Australia they would be liable to pay the 32.5 per cent tax from the first dollar of income earned in Australia.

1:00 pm

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party) Share this | | Hansard source

I support the legislation. I am making a very short contribution, as I made an adjournment speech on this issue on 10 November, and I would like to refer the Senate to that adjournment speech. I urge the Senate to stop the delay. I would like to thank the Deputy Prime Minister for the review into the backpacker tax announced on the back of what we were hearing on the ground, particularly in my home state of Victoria. We ran forums in Shepparton to hear from growers, processors and producers about the impact of the then—and maybe soon to be existing—rate of tax for backpackers. They were unanimous: solve it. So we went out and consulted with industry and we found the solution. I challenge the senators here who have continually sought to delay the processing and the passing of the legislation to fix this issue. We ensured that the timing of that solution was presented in a way that—

Photo of Jacqui LambieJacqui Lambie (Tasmania, Independent) Share this | | Hansard source

20 months later.

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party) Share this | | Hansard source

It is a seasonal industry, Senator Lambie. Not everyone comes from Tasmania. Not everyone's crops are ripening when yours are. When we look around the nation, we know that we need to have a solution presented to this place that will allow farmers and horticulturists from right around regional Australia to actually get their crop off—to secure their businesses and their local farmers. For those who called for the Senate inquiry—another step of delay—look at the farmers who presented to that. They were all Tasmanians. Thank you, re-election campaign of Senator Lambie, for stalling the debate.

Farmers actually came down to Parliament House today from my home state and from states right across the country to make it clear that they wanted this legislation passed and they did not want to still be sitting here on Thursday to do it. They wanted that legislation passed, because the reality is that the world is watching. I have a tweet here from a French website with 22,000 followers who are watching this debate right now. The world is watching, and every moment of delay results in young people, in particular, making decisions about where they will book their around-the-world trip ticket and how that will be paid for. Every day of delay costs our farmers.

I commend the legislation to the Senate. Regarding the economic lunacy that is presented by Mr Bowen, saying that he has a solution, well, with Senator Lambie as treasurer for the Labor Party, putting forward the 10.5, I would argue that he does not. I urge the Senate to pass the legislation as it exists right now and refer you to my Senate adjournment speech of 10 November.

1:03 pm

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I am sorry you are rushed, Senator McKenzie, and I genuinely wish that you had more time to contribute.

Honourable Senators:

Honourable senators interjecting

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

No, I do. And I wish Senator Duniam could stand up and contribute on behalf of Tasmanian fruitgrowers who do not agree with this. But the truth is you tried to pull a stunt yesterday afternoon in the Senate, Senator Cormann. Your speaking list crumbled and we ended up having a vote, which backfired on you, and here we are in a situation where I cannot do my job as a senator. I am under the pump to try and get this voted on. I could certainly spend a couple of hours just on this issue of residency, but I do not have that opportunity, which I find very, very frustrating.

I have no doubt that with the rules the way they, with the clarification the ATO has provided, backpackers in the future will take into account the information they have been provided and the majority of them will end up still being residents for tax purposes. We will maintain in this country our competitive advantage of them not paying tax on the average of $14,000 that they earn.

I urge the Senate: do not give away this country's competitive advantage in attracting backpacker labour to fruitgrowers in the state Senator Lambie and I are from, Tasmania. Do not give away our competitive advantage. Numbers are already down. Nineteen per cent is not acceptable to fruitgrowers in this country, regardless of what the NFF and other cheerleaders for the Liberal and Nationals parties say. It is not acceptable. Do not vote for this legislation.

1:04 pm

Photo of Jacqui LambieJacqui Lambie (Tasmania, Independent) Share this | | Hansard source

I know that many ordinary Australians are a little confused after listening to Treasurer Morrison and Deputy Prime Minister Joyce over the last few days. They have deliberately misled the community about what is happening here. The first myth to bust is that I am not voting against the government backpacker legislation. If this Senate fails to vote for my amendment of 10.5 per cent, then I will not oppose this government legislation. It will pass with the tax at 19 per cent. The government have tried to tell the public of Australia that I and other crossbenchers and Labor will vote against their backpacker legislation. That is deliberately misleading the people of Tasmania and the mainland. But what is new with your lies? Unfortunately some gullible media have even fallen for Barnaby's porkies and reported that I am going to vote against their legislation, when quite clearly I am not.

Photo of Barry O'SullivanBarry O'Sullivan (Queensland, National Party) Share this | | Hansard source

Senator Williams, on a point of order?

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

I ask you to request that Senator Lambie refer to those in this place and in the other place by their correct titles, not in the way she just referred to Minister Joyce.

The TEMPORARY CHAIR: Senator Lambie, it would assist the chair if you were to withdraw that and pay attention to how you refer to members in the other place.

Photo of Jacqui LambieJacqui Lambie (Tasmania, Independent) Share this | | Hansard source

Secondly, it is false to say that the backpacker tax act 10.5 per cent is a tax break for foreign workers. At 10.5 per cent, the backpacker tax—

The TEMPORARY CHAIR: Senator Lambie, my reflection on the withdrawal was the reference to 'porkies' attached to a member of the other place. That has an inference of its own, and I ask you to withdraw.

What do you want me to withdraw, Chair? That he tells porkies, or that it is Barnaby's? Which one is it?

The TEMPORARY CHAIR: You made reference to 'Barnaby's porkies'. I asked you to withdraw the reference to that.

I withdraw 'Barnaby's porkies' to keep the peace. At 10.5 per cent, the backpacker tax will be an increase, not a tax break. I repeat that for some media who are still swallowing the Treasurer's and the Deputy Prime Minister's lines hook, line and sinker. At 10.5 per cent, the backpacker tax will be an increase, not a tax break. Now we all have that right. I know that even at 10.5 per cent backpackers will suffer a disadvantage and have a tax increase over normal arrangements. It is because they stop coming to Tasmania to pick our fruit. Some members of the media and in this parliament may get fooled by this government's deliberate untruths, but the backpackers are not fooled and they are now voting with their feet.

How do we stop them voting with their feet and bypassing Australia? We lower the tax rate from 19 per cent to 10.5 per cent, because 19 per cent is not internationally competitive. How do we know that it is not internationally competitive? Because the backpackers, even at nine per cent, are voting with their feet and avoiding Australia like the plague. We have an opportunity in our parliament to fix this problem right here and now. Do it once and do it right. Guarantee that our farmers are not coming back to this parliament in one or two years and saying, '19 per cent is just not working.'

I am going to speak very slowly for those National Party members of this chamber who have difficulty in understanding this issue. No matter how much you spend on advertising this stinking, rotten tax deal overseas—you can double the promotion budget to $20 million—it will still be a stinking, rotten tax deal. This morning all that the Deputy PM, Mr Joyce, could say on national radio was, 'Jacqui Lambie, Jacqui Lambie, Jacqui Lambie'. All the problems of the Australian rural sector can be blamed on Jacqui Lambie, Jacqui Lambie, Jacqui Lambie. After this morning's interview with Radio Nationalhost Fran Kelly, I think the Deputy PM has an unhealthy fixation with Jacqui Lambie. He said 'Jacqui Lambie' seven times. Get a life! The poor old Deputy PM obviously needs help. The government is falling into Labor's clever political trap to make the Liberals and National look like a bunch of dysfunctional fools. All the Labor Party is doing to take down this government is to give the Deputy Prime Minister an opportunity to speak to our media. That is it: a simple plan to bring down the Turnbull government, let Deputy Prime Minister Joyce—

Photo of Barry O'SullivanBarry O'Sullivan (Queensland, National Party) Share this | | Hansard source

Senator Macdonald on a point of order.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

It is difficult enough to have to listen to this, but every single word is from a written speech which, as you know, is contrary to standing orders. I ask you to bring the senator in line with the standing orders and to not read the speech entirely—even the jokes.

The TEMPORARY CHAIR: Senator Macdonald, there is quite a tolerance here with respect to the process of referring to a written speech. Senator Lambie, please continue.

Photo of Jacqui LambieJacqui Lambie (Tasmania, Independent) Share this | | Hansard source

I am going to break this down even more simply. If you walk outside, hop on the tractor to do some work and you find that all the tyres have been let down again, you know who let your tractor tyres down—yep—it is those crazy next door neighbours, the Nats. They sit on their porches in there rocking chairs with pieces of straw hanging out of their mouths with their modified Adler shotguns cradled in their arms, because they cannot hit the tin cans and the flying foxes with their first shots. So what do you do? The crazy Nats have crept over in the middle of the night, again—they have done it for the last 18 months—terrorised the sheep, put in crop circles, flogged your fuel and let down all your tractor tyres again. Do you pump up three tractor tyres before you do your work or do you pump up four? Do you have a 19 per cent backpacker tax or do you have a 10.5 per cent tax? The crazy Nationals, with their 11-shot rapid-fire shotguns and Jackie Lambie obsession, would love it if you only pumped up three out of the four tyres they have let down. The Nationals want to rock on their verandahs, laugh and take pot shots with their Adler shotguns while farmers struggle to get their work done.

In all seriousness, everyone knows that the 19 per cent backpacker tax proposed by the Nationals will not work. It is not internationally competitive. A 10.5 per cent backpacker tax is internationally competitive. Supporting a 19 per cent backpacker tax is like pumping up three tyres after your crazy next door neighbour has let down four tyres. My message to the Nationals today is very simple, and understood by the people in the bush that the Nationals pretend to represent: if you are going to do the job, do it once and get it right. If this legislation is amended to 10.5 per cent by a vote in the Senate during the committee stage then the National senators must have the guts to vote in the third and final reading of this legislation against their own amended and improved legislation, legislation that they know will fix a problem that they have created and that they have done nothing about for well over 18 months. They sit in this chamber under the gaze of farmers whose livelihoods have been placed in jeopardy by their dysfunction and inaction. And they vote against their own reasonably amended legislation that will give immediate and lasting certainty and relief to tens of thousands of farming families and workers all over Australia, especially in my Tasmania. Between the drought, the floods, the dairy crisis and now this, we cannot take any more in Tasmania.

1:14 pm

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

by leave—I move Australian Greens requests (1) and (2) together:

(1) Schedule 1, item 6, page 5 (line 15) omit "on $37,000 of that salary,", substitute "for the part of that salary exceeding the tax-free threshold but not exceeding $37,000,".

(2) Schedule 1, item 7, page 5 (table item 1), omit the table item, substitute:

Statement pursuant to the order of the Senate of 26 June 2000

These amendments are framed as requests because they are to a bill which imposes taxation within the meaning of section 53 of the Constitution. The Senate may not amend a bill imposing taxation. These amendments should therefore be moved as requests.

Statement by the Clerk of the Senate pursuant to the order of the Senate of 26 June 2000

As this is a bill imposing taxation within the meaning of section 53 of the Constitution, any Senate amendment to the bill must be moved as a request. This is in accordance with the precedents of the Senate.

I have already spoken today so I will not say any more except to say, very simply, that these amendments amend Senator Lambie's amendment. It essentially aligns the 10.5 per cent tax rate with $18,200 so that on the first dollar earned as a backpacker you pay 10.5 per cent up to $18,200—the same as the tax-free threshold for Australian residents. Above $18,200, to $37,000, you pay 19c in the dollar—the same as an Australian resident. So this essentially takes it to 10.5 per cent to $18,200, which we feel is fairer, given that above $18,200 Australian workers would be paying the same tax rate as foreign workers. We see Senator Lambie's amendment as being problematic because 10.5 per cent above $18,200 does at least appear to allow foreign workers to have a lower tax rate than Australian workers. So we believe it should be 10.5 per cent for the first $18,200 and above that it should be 19c in the dollar.

1:15 pm

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

I will talk to all three amendments that have been circulated, which broadly seek to achieve the same thing. The government does not support the proposal to reduce the tax rate further from 32.5 per cent, as currently applies, to 10.5 per cent. We think that 19 per cent is the appropriate line in the sand.

1:16 pm

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party) Share this | | Hansard source

Labor will be opposing this amendment. We do this because we believe that 10.5 per cent is a better and fairer level at which to set the working-holiday maker tax rate.

The TEMPORARY CHAIR: The question is that the Australian Greens requests (1) and (2) circulated on sheet 7970 be agreed to.

Question negatived.

Photo of Jacqui LambieJacqui Lambie (Tasmania, Independent) Share this | | Hansard source

I wish to advise the Committee that I will not be proceeding with my request on sheet 7955 revised and I seek leave to move requests (1) and (2) young on sheet 7949, revised, together.

Leave granted.

I move:

(1) Schedule 1, item 6, page 5 (line 15) omit "19%", substitute "10.5%".

(2) Schedule 1, item 7, page 5 (table item 1), omit "19%", substitute "10.5%".

Statement pursuant to the order of the Senate of 26 June 2000

These amendments are framed as requests because they are to a bill which imposes taxation within the meaning of section 53 of the Constitution. The Senate may not amend a bill imposing taxation. These amendments should therefore be moved as requests.

Statement by the Clerk of the Senate pursuant to the order of the Senate of 26 June 2000

As this is a bill imposing taxation within the meaning of section 53 of the Constitution, any Senate amendment to the bill must be moved as a request. This is in accordance with the precedents of the Senate.

I recommend these amendments to the Senate.

1:17 pm

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

I have a couple of questions for Senator Lambie in relation to these amendments. Could Senator Lambie inform the Senate as to what the unemployment levels are in Tasmania, especially in relation to youth unemployment? What number of people are seeking work and what number have given up seeking work in Tasmania? Could you enlighten the Senate on those details?

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Can I just make this point, because it is quite clear what is happening here: we, as the opposition, in good faith gave the government this time to resolve this matter so that it could be voted on and what we have seen from the government senators is, frankly, a willingness to filibuster and extend the time on this debate. Let's be clear: we gave a commitment that we would give up this time so that the government could fix up its own mess, deal with the backpacker tax, and then deal with the recommittal, at the request of One Nation senators, which we will deal with. Now we have government backbenchers asking questions about an issue everybody knows has been well-ventilated in this debate. What a joke. Can't you run the parliament? Let's get on and vote.

1:18 pm

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

That was an unnecessary contribution. The government has been dealing with this issue very swiftly. All of the contributions of coalition senators have been very concise.

Opposition Senators:

Opposition senators interjecting

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

Last night, Senator Di Natale did not turn up to speak in the second reading debate. Even after a quorum call was held he still did not turn up to speak in the debate.

Opposition senators interjecting

The government is very keen to have this issue resolved before question time. We very much appreciate the cooperation of the opposition in ensuring that in relation to last night's vote the will of the Senate is maintained, given that two One Nation senators yesterday missed a division.

1:19 pm

Photo of Nick McKimNick McKim (Tasmania, Australian Greens) Share this | | Hansard source

Briefly, in response to the rubbish we just heard from Senator Cormann with regard to Senator Di Natale not being here: the situation last night was that Senator Duniam was the next senator on the speaking list and, because Senator Cormann and Senator Duniam had cooked up a strategy to bring that debate to a close, in fact Senator Di Natale was not here because it was actually not his turn on the speaking list. It was Senator Duniam's turn on the speaking list, and then Senator Cormann got to his feet, got the call and therefore closed the debate. I wanted to place that on the record.

By the way, these questions from Senator Williams to Senator Lambie are a disgrace. He is attacking Tasmania. He is attacking Tasmanian farmers. It's like the Three Amigos: you never learn, you mob. It is why you got so thrashed in the election in Tasmania, why you lost lower house seats, why you lost Senate seats: you are out of touch with farmers. What Senator Lambie and the Greens are trying to do in here is stick up for Tassie farmers like Tim Reid, who, by the way, I used to pick apples for, so I do know what I am talking about here. I have pulled apples off the tree for Tim back in the day to earn money to go backpacking, by the way, so don't come in here and try to lecture me about what is best for farmers and what is best for backpackers.

1:21 pm

Photo of Jacqui LambieJacqui Lambie (Tasmania, Independent) Share this | | Hansard source

In relation to remarks from Senator Williams: first of all, I know where you are going here, trying to cover your own rear-end for the massive mistake that you have just made.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Just ignore them. They're just filibustering.

Photo of Jacqui LambieJacqui Lambie (Tasmania, Independent) Share this | | Hansard source

Yes, I know what they're trying to do.

Just so we are very clear down here: even if I had every youth working in Tasmania, I would still not have enough to pick fruit. You know that as well as I do. You are telling me that I am taking jobs off our locals, but that is rubbish. If you have not noticed, we have a crisis with our youth. They are not working, and that is why I am working very closely with Mr Tudge on that welfare card, so you should be congratulating me, not sitting here taking the absolute crap out of me, Mr Williams. That is what I am doing for you people, trying to sell your welfare card. I am trying to do something.

I have put things out there. I have asked for you people over that side to look at voluntary national service. I have asked for the trade skills to be lifted in this country while you are taking shipping jobs offshore. That is right: the Nationals and Liberal Party are taking the trade skills of our shippers offshore. You are now coming for our truck drivers. Don't you dare criticise me with your crap, because I am not taking it.

Photo of Barry O'SullivanBarry O'Sullivan (Queensland, National Party) Share this | | Hansard source

Senator Lambie, just be careful with your expressions in this place. Senator Williams.

1:22 pm

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

I just asked a simple question of Senator Lambie, and I hope she remains civil during this brief question I am going to ask Senator Wong. I have the right to ask these questions. The point I have made I made to my side and other sides. We have got 735,000 unemployed Australians in this country. The unemployment rate for Tasmanians aged 15 to 24 is 16.1 per cent. There are 7,100 youths who were unemployed and 21,200 youths who were not in the labour force, a total of 28,000 youth. The point I am making in this whole debate that has been going on for months is: why aren't unemployed Australians doing this work?

As far as your amendment goes, Senator Lambie, I think it is unfair. I will give you an example. I am just being civil and asking you a civil question. A shearer comes out here from South Africa and after six weeks breaches the $18,200 and is paying 10.5 per cent tax. A shearer shearing 200 sheep a day will earn $600 a day and $3,000 a week. In six weeks they will breach the $18,000 mark. Why should I be shearing alongside a shearer from South Africa when I am paying—

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

You already said this in your second reading speech.

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

Senator Whish-Wilson, I am trying to ask a sensible—

The TEMPORARY CHAIR: Through the chair, Senator Williams.

I am just saying I think it is very unfair that I would be paying 32 or 37 per cent tax as an Australian shearer while the overseas backpacker shearer alongside me is paying 10.5 per cent. I think that is very unfair, and that is the point I want to make through this whole debate. Life is about fairness. We should be fair not only to the foreign workers but to the Australian workers as well. These people in the Labor Party supposedly represent the Australian workers. You should be sticking up for a fair tax system for Australians as well.

1:24 pm

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party) Share this | | Hansard source

In the interests of time, I will just say that the opposition will be supporting Senator Lambie's amendment. We acknowledge the work she has done. The reasons we support reducing the tax rate to 10½ per cent have been well ventilated in the other place and in the media, so I do not see the need to add further to that.

Photo of Barry O'SullivanBarry O'Sullivan (Queensland, National Party) Share this | | Hansard source

The question is that Jacqui Lambie Network amendments (1) and (2) on sheet 7949 be agreed to.