The initial proposal under the May 2015 budget would have subjected non-residents with working visas in the tourism sector to a 32.5 cent per dollar tax rate for those between income levels of zero to $80,000 from January 1.

This pales in comparison with no tax enjoyed by residents earning between $0 and $18,200, 19% for the next income bracket ($18,201 and $37,000), and small increments above that. The government’s plan was to raise $500 million from the increased tax rates. The government will, however, look to make the bulk of this money through increasing the passenger levy by $5. This takes the passenger levy from $55 to $60, with the new rates not kicking in till July 1, 2017. Additionally, the tax on the superannuation payments of holidaymakers’ will increase to 95%.

The government also plans to make changes to some tourism policies. These include bringing down the visa application charge from $440 to $390 and making changes to the 417/462 to ensure the supply of working holiday makers remains fluid. The proposed changes include extending the age of eligibility by 5 years to 35. Another mooted change is to also to allow holidaymakers work with the same employer for 12 months, but in at least at two locations with a maximum of six months in one location.

Plans are also afoot to boost the tourism sector’s ability to attract tourists, with $10 million earmarked to Tourism Australia for this purpose. The new tax arrangement will still, however, have to be ratified by legislation through the Australian Parliament.

To make the system transparent and to prevent employers exploiting working holiday makers, employers will have to undertake a one-time registration with the ATO. An employer who fails to register will be charged a withhold tax of 32.5%. Registered employers will now appear on a publication list on the ABN Lookup where holidaymakers can check for them.