The Federal Government will delay its introduction of the controversial 32.5% tax on temporary and seasonal agriculture workers, in what some sources have told the ABC will effectively "kill" the measure.

Small Business Minister Kelly O'Dwyer's announcement today (May 17 in Australia) was welcomed by vegetable and potato grower industry body Ausveg, which along with other agricultural groups has opposed the plan to remove the tax-free threshold that currently applies for amounts below AUD$18,200.

The government will now review the tax measure, with its commencement deferred until Jan. 1, 2017.

"The Government has listened to issues raised by stakeholders about workforce challenges faced by industries in regional and rural areas and how the taxation arrangements for Working Holiday Maker visa holders potentially affect industries such as agriculture and tourism," O'Dwyer said.

"The Government recognises that working holiday makers are an important source of labour in Australia and the ‘Review of 417 and 462 Visa Labour’ will ensure our labour supply is adequate and Australia remains competitive globally.

"As a result, a re-elected Turnbull Government will undertake a comprehensive review of the broad range of issues affecting the supply of working holiday makers. The review will also address issues of labour supply more broadly for the agriculture and tourism sectors."

She said the review would consider a range of issues such as short-term and long-term needs in agriculture and tourism, regulatory imposts on employers and opportunities to expand the supply of seasonal workers while ensuring Australians still have priority for available work.

"The review will also assess Australia’s competitive position in attracting seasonal and temporary labour, including comparative wages and taxation.

"The ‘Review of 417 and 462 Visa Labour’ will report by mid-October, with agreed changes
to take effect from 1 January 2017."

The Working Holiday Maker program, which includes the Working Holiday (subclass 417) visa and Work and Holiday (subclass 462) visa, allows visa holders to stay in Australia for 12 months and work for up to six months with any one employer.

Statistics from the Department of Immigration and Border Protection show that the number of backpackers coming to Australia has dropped repeatedly over the past two years, with over 34,000 fewer visas granted in 2014-15 than in 2012-13.

The decision was met with praise by vegetable and potato grower body Ausveg, as well as the Australian Banana Growers Council (ABGC).

“The Federal Government’s decision to review the backpacker tax is a welcome sign that they are finally acknowledging the concerns held by the Australian agriculture industry, and we hope that this is a step on the road towards the implementation of a more reasonable solution,” said Ausveg deputy CEO Andrew White.

"Australian vegetable growers rely on backpackers to offset domestic labour shortages and perform the high amounts of manual labour needed in vegetable production.

"Whether the tax is introduced at the currently proposed level now or in six months, the effect will be the same – it will threaten the availability of this vital labour source and leave growers unable to get crops off the field.”

The ABGC described the delay was "unequivocally positive" for the industry, as the banana industry depends on traveling workers for 50% of its labor force.

"Without the backpackers working on farms we would not be able to farm the amount of product we have," said ABGC board memeber Steve Lizzio.

"Having a reliable workforce affects so much of our supply chain. On farm, having a good workforce certainly impacts the quality and quantity of product we are able to produce. Every farmer is only as good as their workforce.

"Common sense has prevailed for now. I’m very happy the government has announced a rethink on its position in this case."

The Queensland Farmers Federation (QFF) did not react as positively however, with CEO Ruth Wade describing the measure as a long way short of not introducing the new tax.

"This announcement will not provide the certainly agricultural and tourism operators have been calling for and is out of touch with the needs of our industries and regional communities," Wade said.

"The Federal Government’s inaction on the Backpacker Tax has made this an election issue and QFF and its member industries will continue its campaign in opposition to this damaging new tax.

"It’s now time that the Labor Party also clarify their position on whether they would implement this new tax. The Backpacker tax will continue to be an election issue until we have certainly that it will not be introduced.

Related story: Australia: Ausveg "disappointed" by budget backpacker tax decision

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