December 1, 2016 / 8:50 AM / a year ago

Australia cuts tax to ensure juicy pickings for fruit harvesters

SYDNEY, Dec 1 (Reuters) - A tax faced by visitors picking fruit in Australia will be more than halved under a deal Prime Minister Malcolm Turnbull struck late on Thursday with political parties across the spectrum, just in time for the harvest.

The issue threatened Australia’s fruit exports, set to hit a record A$2.27 billion ($1.68 billion) next season, as farm groups warned a lack of workers would mean items such as cherries and stone fruit would be left to rot.

“What this has done is provide security and assurance to farmers,” Turnbull told reporters in the Australian capital of Canberra, announcing a cut in the tax rate to 15 percent, from 32.5 percent.

Fruit growers rely heavily for labour on overseas workers, who are allowed to stay a second year in Australia on condition that they complete three months of work in the rural industry.

However, changes to the law last year made such workers liable to tax of 32.5 percent from January 1, unless legislation were changed before a Friday deadline.

Previously, the workers could claim a tax-free threshold that allowed most to escape tax.

Australian fruit growers said their produce would have rotted if a deal on the so-called “backpacker tax” had not been brokered before a season that typically runs from the beginning of December to the end of January.

“We would not be able to operate our business without them,” said Tim Reid, a cherry farmer on the southern island of Tasmania.

“Fifteen percent is far, far better than the 32.5 percent that was going to come in from January 1.”

The higher rate will now affect fewer than 20,000 people, with weekly earnings between A$200 and A$400, apart from their food and accommodation.

The issue exploded into national prominence with the ruling coalition and opposition Labor parties disagreeing on the tax rate - Labor sought a lower rate while Turnbull’s coalition said a higher rate would help the budget bottom line. ($1=A$1.3543) (Reporting by Colin Packham; Editing by Clarence Fernandez)

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