The cost of international flights are set to increase as the Federal Government reneged on a plan to tax backpackers who come to Australia to work at a higher rate. The cost of backtracking on the plan will be recouped by increasing the levy on international airline tickets. Here's what you need to know.
Earlier in the year, the Federal Government had announced plans to tax backpackers that come to Australia to work at 32.5c for every dollar they earn. At the time, the farming industry was up in arms about the deal. Backpackers are often hired by farmers for temporary work during harvest season and the higher tax rate may discourage these casual workers from taking up jobs on offer. The tourism industry was also opposed to it, claiming it would discourage backpackers from travelling to Australia.
On Tuesday, Treasurer Scott Morrison confirmed the Government has watered down the backpacker tax so that people that come over on 417 working visas will be taxed 19c for every dollar they earn, instead of the original 32.5c.
But since earnings from the backpacker tax was factored into the Federal Budget, the Government needs to make up for the money that will be lost. To do this, it is raising the Passenger Movement Charge (PMC), a tax that is paid by all passengers that leave Australia on international flights or by sea transport.
The PMC is currently set at $55 per passenger ticket, but will go up to $60 from July 1, 2017. The extra cost will no doubt be passed on to consumers as an additional surcharge by airlines. Australia already has the second highest departure tax in the world.
The increased PMC is expected to bring in $345 million for the Government. The increased backpacker tax was expected to bring in $500 million.
The Tourism & Transport Forum Australia (TTF) had called the PMC the "world's worst departure tax" because it's charged at a flat rate regardless of how far you travel and hurts Australian tourism:
"The Australian Government revenue from the PMC is now more than double the amount required to find its border agencies (including customs and border protection, quarantine and immigration."
TTF chief executive Margy Osmond said the Government is treating the tourism industry like a "cash cow".