The beleaguered "backpacker tax" is back in limbo after the Senate snubbed a deal between the Turnbull government and One Nation for a 15 per cent tax on backpackers and reduced it to 10.5 per cent.
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The Labor amendment to reduce the rate was passed by 35 votes to 32, and had the backing of the Greens, Derryn Hinch, Jacqui Lambie, David Leyonhjelm and One Nation's Rod Culleton, who again split with the rest of his party.
It is a hugely embarrassing turn of events for the Turnbull government, which on Monday backed down from its proposed 19.5 per cent rate and trumpeted a deal with One Nation for a compromise position of 15 per cent.
Nationals leader Barnaby Joyce gathered his entire party room for a press conference to declare the issue "fixed", while deputy leader Fiona Nash said: "We now have a 15 per cent rate. It's a good outcome."
Treasurer Scott Morrison said the government had "got together with other adults in the room" to strike a deal and that: "It doesn't matter what the Labor Party thinks now ... frankly the Labor Party can go and take a flying leap."
But in a surprise decision, the Labor amendment received enough Senate support to pass and means the amended bill will now return to the House of Representatives, where the government will have to decide whether to accept the lower tax rate.
Changes to taxation laws mean that working holidaymakers will be classed as non-residents from next year and will be taxed on the first dollar they earn. If the Parliament does not settle on a reduced rate, they will be whacked at 32.5 cents in the dollar.
Finance Minister Mathias Cormann immediately ruled out supporting the amended bill in the lower house.
"The government will not be accepting these requests in the House of Representatives," he said. "The people who got stuffed today by Labor, Greens, Senator Hinch, Senator Culleton are the farmers of Australia."
But Labor and parts of the crossbench are now appealing to disgruntled Coalition MPs to cross the floor and back the amended bill.
Labor's spokesman for regional affairs Joel Fitzgibbon singled out regional electorate MPs such as George Christensen, Andrew Broad and Ann Sudmalis, calling on them to "do the right thing by their farming communities and come with us".
Senator Hinch told Sky News he decided to back the 10.5 per cent rate partly after a conversation he had at a prime ministerial party at The Lodge on Sunday when he heard Mr Morrison was opposed to the 15 per cent rate, but then embraced it the next day.
"It's back to the lower house, it's on their head. You can solve it," he said. "You've got a couple of Nationals who crossed the floor over the Adler [shotgun], why don't they cross the floor for the farmers?"
The development is also an embarrassment for One Nation leader Pauline Hanson, who on Monday claimed credit for the deal with the government and described it as a "win for One Nation".
Now the deal is in tatters and the party has plunged back into a damaging split.
Senator Culleton, a farmer from Western Australia, told Sky News he defied his party's position because he wanted to support fellow farmers.
"The party's position was 15. But like I say, we're all senators and my position has always been at 10½," he said. "This is intensive labour which is hard to find and we need to look after the farmers."
More to come
