Anyone on a working holiday visa will have to pay tax from their first dollar earned, rather than enjoying their first $20,000 of earnings being tax-free, said Treasurer Joe Hockey in his budget speech.
From July 2016, backpackers and others on working holidays will lose access to the tax-free threshold and have to pay 32.5 cents in tax for every dollar they make.
The change, which will see working holiday visa holders lose the status of “residents for tax purposes”, is forecast to save the Budget $540 million over the next four days.
Under current tax regulation, foreigners on working holidays in Australia are treated as residents for tax purposes if they have been in Australia for more than six months (half of the income year).
The change comes amid concerns people on working holiday visas were being mistreated in Australia.
The workers are hired under 417 working visas, by labour hire companies alleged to be skimming off millions of dollars in unpaid wages.
The ABC’s Four Corners program recently revealed underpayment, exploitation and terrible working conditions for migrant workers on farms and in a range of industries, including vegetable and fruit farms, and chicken factories.