The plan to impose a 32.5% tax on backpacker workers has been dropped. Workers will instead be liable for 19% tax on every dollar that they earn.
And the cost of a working holiday visa will come down from $440 to $390.
The compromise deal follows an outcry from both the agricultural and tourist industries.
Farmers complained the tax rate could affect their labour supply, while tourism operators maintained it would put backpackers and tourists off visiting Australia altogether.
An estimated 600,000 backpackers travel to Australia every year and many of them find work picking fruit.
Treasurer Morrison said these changes were designed to encourage backpackers to come to Australia as they were an “important source of labour for the agricultural sector”. He also added that the new rate of tax was “commensurate” with the likes of Canada, the UK and New Zealand.
"It is an important sector for the tourism industry, also a very important source of labour in the agricultural sector, particularly for seasonal labour," said Morrison.
In his statement he also highlighted some other key points, including increasing the age limit from 30 to 35 and that employers could employ working holiday makers in different areas during the 12-month period.
He also added that Tourism Australia would be given an addition AU$10million to specifically promote the country to potential working holiday makers.
The tax changes are set to come into force as we come into 2017.
One major positive thing from this announcement is that the period of uncertainty is over and that backpackers can now make informed decisions on their travel plans.
words by James Clark