The Government Backs Down On $500 Million Backpacker Tax

People on working visas will now pay 19% tax for the first $37,000 they earn.

As the whole world was glued to TV screens and Twitter feeds, gorging itself on the first US presidential debate, the Turnbull government used the opportunity to quietly announce it would be dropping the controversial backpacker tax.

ABC News 24 @ABCNews24

The Government has dropped its plan to introduce a 32.5% tax on backpacker workers

01:52 AM - 27 Sep 2016

The "backpacker tax" would have seen young tourists visiting Australia slugged with a 32.5% tax on every dollar earned, in industries like bar work and fruit picking.

Tracey Nearmy / AAPIMAGE

It's been a long-running issue for the government, with Nationals MPs against the increase because it would have put pressure on the tourism sector and rural industries that rely on backpacker workers.

Some estimates suggest backpackers make up 25% of farm workers every year.

In an effort to scrap the tax-free threshold for backpackers, the government proposed a 32.5% in the 2015 budget, which aimed to raise $500 million over three years.

Morrison said backpackers will now be taxed at 19% for the first $37,000 earned and then the normal tax rates beyond that.

"These changes will lower the cost of coming to Australia for working holiday makers and leave them with more money in their pockets to be able to spend here in Australia in communities right across the country," said Morrison.