Backpacker tax on the back burner

THE Turnbull government has hit the pause button on the much-maligned backpacker tax, providing temporary relief for farmers and tourism operators in regional areas who are still calling for the tax to be scrapped.

The tax would have seen working holidaymakers taxed 32.5% on every dollar they earned in Australia.

On Tuesday Assistant Treasurer Kelly O'Dwyer announced it would be delayed six months.

The tax was due to start on July 1, a day before voters head to the polls in the first double dissolution election since 1987.

But Ms O'Dwyer said her message to backpackers hoping to work in Australia was that "they will not be treated as non-residents for tax purposes for the next six months" - leaving open a January 1 start date instead.

She said it would be delayed while the government reviewed the proposal - a review announced just before the election campaign proper got underway just over a week ago.

That review will be led by Deputy Prime Minister Barnaby Joyce, who has been under pressure from backbenchers in his National Party to dump the policy.

The government would forgo $40 million in extra revenue because of the delay, but Ms O'Dwyer would not be drawn on whether it would scrap the proposal altogether, which could leave a $500 million hole in the budget.

Rural groups including the National Farmers Federation and tourism lobby the Tourism and Transport Forum backed the delay, but on Tuesday reiterated their calls for the proposal to be scrapped completely.

The government's decision on Tuesday also followed the Queensland Farmers' Federation garnering 47,000 signatures on an online petition calling for the policy to be scrapped.

Australian Chamber of Commerce and Industry chief James Pearson said the "eventual abolition" of the tax remained a key issue for regional tourism and business.

"Working holidaymakers do jobs that otherwise would not get done. They keep open the doors of tourism businesses - particularly in regional Australia," he said.

"The backpacker tax focused on revenue-raising.

"Its design didn't take into account that most of the money that working holidaymakers earn, and often a good chunk of their savings, is spent in the local communities in which they are employed."

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