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Backpacker tax rate pretty good




LABOR has called on reluctant coalition MPs to speak out against the government’s revised backpacker tax arrangements.

But one Liberal believes a lower tax rate than initially planned is appropriate, saying the opposition should get out of the way.

As MPs begin debating government legislation on Monday, South Australian MP Rowan Ramsey admits the original 32.5 per cent tax flagged in the 2015 budget would have done a lot of damage to the industry and the new rate of 19 per cent brings Australia into line with other countries.

Mr Ramsey says hes happy with the result and so is business. Weve got to get it legislated, he told reporters in Canberra.

Labors agriculture spokesman Joel Fitzgibbon says the tax is ill-conceived, fearing just as many backpackers will be driven away with the 19 per cent rate.

I call on a divided government to work with the opposition and all stakeholders to produce an outcome which allows Australia to be internationally competitive, he said.

Mr Fitzgibbon warned backpacker numbers started falling away the day the tax was announced and the problem continues.

[Agriculture Minister Barnaby Joyce] is introducing a tax he knows is going to leave fruit rotting on trees like Tasmania and elsewhere.

But Mr Fitzgibbon conceded the agriculture industry is split on the issue. I want those on the backbench in the government who are privately saying 19 per cent is a bad idea to speak out.

Coalition senator Barry OSullivan has slammed the way his government has handled the reworking of the tax, telling parliament the matter could have been handled better and more promptly.

Nationals deputy leader Fiona Nash insisted the government had worked through the issues.

Whats been welcomed is the fact that we have come to a common sense conclusion in relation to the backpacker tax, she told reporters.

She insisted the reworked tax was a great outcome for farmers, businesses and backpackers.

Borrowing to invest what are your options


BORROWING to invest has fallen from favour, despite the numbers surrounding it now stacking up better than ever.

Horror stories from the global financial crisis where retirees lost their houses after dodgy advisers told them to use aggressive home equity loan strategies to buy shares have haunted the psyche of many Australians.

COMPARE HOME LOANS

Reserve Bank data shows that margin lending once popular among investors is still at less than one third of the levels achieved during the sharemarkets peak in 2007.

Indeed borrowing to invest is not for the faint-hearted and you will need to do your research or talk to a financial adviser. However, todays low interest rates and high share dividends present a compelling argument for borrowing.

When you can borrow money at less than 5 per cent to buy a blue-chip share that is effectively paying 8 or 9 per cent a year in income, some investors see it as a no-brainer.

I cant see why you wouldnt do it, as long as you are not going to be a forced seller, says Middletons Securities adviser David Middleton.

Borrowing improves your cash flow it doesnt make it worse, he says. You cant claim for negative gearing, but its better to pay tax on a profit rather than get a tax deduction for a loss.

Borrowing magnifies investment losses and investment gains, so it must be a long-term investment. For investors who borrowed before the GFC, that long-term is stretching towards a decade because the overall markets value is still well below its 2007 peak. If you can stomach the volatility and look long term, here are some options:

Borrowing against your home gives you the lowest interest rate and the most secure loan. As long as you pay the interest its all good.

People who lost their homes in the GFC typically borrowed against their home and then borrowed again through a margin loan, coming unstuck by this double-gearing strategy when share prices halved.

Youll pay higher interest than a mortgage and your shares are used as security, so if they fall too low you get a margin call where you have to stump up extra cash or your shares get sold from under you.

Margin lenders generally allow borrowings up to 70 per cent of a shares value, but Middleton says its best to limit your debt to no more than 30 per cent of the value so you can withstand a significant downturn without suffering a margin call.

Geared share funds take your money and typically borrow against that so you own twice the shares you could otherwise buy. This means you can win big and lose big.

You can get very volatile valuations from these because they amplify returns, Middleton says.