TTF View – February 2012
Tax breaks needed to spur investment in
quality domestic product
By John Lee, chief executive, Tourism & Transport Forum
A POPULAR definition of insanity is doing the same thing over and over and expecting different results.
So it is with maintaining the status quo when it comes to tourism marketing and infrastructure investment. Granted, we live in somewhat straitened fiscal times, however some relatively minor amendments would see Australian tourism considerably better off.
Australians took a record 7.8 million overseas trips in 2011 – up almost 10 per cent for the year. However, the number of international visitors to Australia fell by 10,000 in 2011, with declines from traditional source markets including the UK, US, Canada, Europe and Japan.
And it’s the ongoing global economic uncertainty dampening demand from those countries that is behind the continuing strength in the Australian dollar which is fuelling outbound travel.
There are some bright spots, including rising arrivals from China, Indonesia, India and the Philippines, and while we can expect future growth from these countries, we could exceed growth forecasts by giving our marketing agencies sufficient backing to advertise and promote Australia to their burgeoning middle classes.
Instead, marketing budgets are being cut, and our agencies are being asked to do more with less.
More pressing is the need to invest in new tourism accommodation and experiences to lift capacity and provide compelling reasons to travel in Australia. Especially to people in our biggest source market – Australia.
Domestic tourism still accounts for around three-quarters of tourism spending, so convincing Australians to holiday at home is vital – our tourism offer must be competitive.
This does not mean Australian destinations should undercut international competitors’ prices or sacrifice yield – an unsustainable strategy. It means offering quality products and experiences at a price which delivers value to the consumer.
To this end, TTF is calling on the Federal Government for tax reforms to foster investment in new and refurbished accommodation and attractions. Accelerated depreciation for furniture, fixtures and equipment would allow operators to renew their product in a timeframe which better reflects the 24/7 nature of tourism operations.
A 50 per cent capital works deduction bonus (with the balance spread over 12.5 years at four per cent) would stimulate investment in new accommodation development. Allowing tax-loss carry backs would acknowledge the seasonal nature of tourism, and the impact of natural disasters and extreme weather events on tourism revenues.
There are already around 36,000 job vacancies in tourism and hospitality nationwide and the tourism workforce will need to grow by 152,000 by the end of the decade.
To help address the immediate shortage, we are calling for reforms to working holiday maker visas to afford regional tourism and hospitality operators the same privileges enjoyed by agriculture, pearling and mining.
We would like the current six-month limit with one employer removed to allow businesses to recoup their investment in new staff, and the age limit lifted from 30 to 35 to reflect the changing nature of the working holiday maker market.
These reforms would improve the viability of Australia’s tourism industry and give Australia a better chance of reaching the Tourism 2020 target of doubling overnight visitor expenditure to $140 billion, with its economic and employment benefits.
TTF View appears quarterly.