‘Backpacker tax’ could send shockwaves through the English language course sector

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‘Backpacker tax’ could send shockwaves through the English language course sector

One of the shock announcements of the Budget was that working holiday visa holders will be required to pay about a third of their earnings in taxes. The Treasurer announced that from July 2016, those on a working holiday in Australia will no longer enjoy a tax free threshold of up to $18,200, and will instead be forced to pay 32.5 per cent tax from their first dollar earned. That measure will apparently save the budget $540 million over four years.


What is the real cost of this? Backpackers might go elsewhere like New Zealand. Fewer backpackers here could also mean a dive in the enrolments in the ELICOS sector – the English Language Intensive Courses for Overseas students. The ELICOS visa has been used by many backpackers to remain in Australia at the end of their work/holiday stint and some go on to full student visas for other courses.


Sue Blundell, English Australia’s executive director told The Australian that taxing backpackers will affect the ELICOS sector badly as these working holiday-makers could start looking elsewhere and drastically damage a $2 billion dollar industry.


The ELICOS sector accounted for 15.0% of total student enrolments and 21.5% of total commencements in YTD February 2015. A report by EA and the federal Department of Education has found that almost 164,000 students started English language courses last year, with student numbers increasing by 11 per cent on last year and revenues climbing to $2 billion.


China accounted for the largest cohort of enrolments and commencements in ELICOS with shares of 26.1% and 21.7% respectively. Brazil was the next largest nationality for ELICOS enrolments with 8.0%, followed by Thailand and Colombia (7.8% and 6.9% respectively).


Ms Blundell said ELICOS colleges faced a tougher time from July next year following last week’s budget decision to remove the tax-free threshold from working holiday-makers’ earnings.


“But the tax status of working holiday-makers is a huge thing,” she said. “We’re going to see ourselves losing working holiday-makers hand over fist — they’ll go to New Zealand, where they can still have those tax benefits.”


Source: Migration Alliance

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