The Australian government will delay its plan to introduce a so-called “backpacker tax” after a backlash from farmers and the tourism industry.
Tourists on working holiday visas were set to be excluded from the country’s tax-free threshold from 1 July.
Under the plan they would have been taxed at 32.5c for every dollar they earned in Australia.
But the tourism and farming sectors, which rely on temporary workers, lobbied hard against the change.
Industry bodies said higher taxes would push temporary workers to choose destinations such as New Zealand and Canada over Australia.
Applications for Australia’s working holiday visas have reportedly already dropped by 5% since the plan was announced.
Assistant Treasurer Kelly O’Dwyer said Tuesday that the tax would be deferred for six months.
“I can tell you with great certainty that this is very good news for rural and regional communities; it’s good news for our tourism sector; and it’s good news for working holiday makers,” Ms O’Dwyer said.
But the opposition Labor party labelled the move a “stunt to push the issue beyond the election” on 2 July.
The government estimates that taxing backpackers at a higher rate can deliver revenues of about A$540m (£274m, $396m) over three years.