Hospitality employers call for super tax reform for migrant workers
Employers are urging the federal government to overhaul superannuation tax settings for working holidaymakers and other temporary visa holders, arguing the current framework amounts to a “hidden national payroll tax” on small hospitality businesses while stripping migrants of most of their super.
Under existing rules, employers must pay 12% superannuation when hiring working holidaymakers, international students and other temporary migrants. Those contributions are taxed at 15% on entry, then hit with a Departing Australia Superannuation Payment (DASP) exit tax of 65% when the worker leaves Australia.
The Australian Restaurant and Cafe Association (ARCA) said the “largely hidden” arrangement was quietly eroding the retirement savings of temporary workers, while requiring small operators to fund the contributions in full.
Calling the system a “nearly hidden exploitation of workers” by government and the Australian Taxation Office, ARCA chief executive Wes Lambert said: “This is one of the most opaque and unfair labour taxes in the system. The government gets the money, the worker loses most of their super, and small hospitality businesses are left paying what is effectively a hidden national payroll tax – with zero return.”
In its pre-budget submission, ARCA called for changes to both income tax and superannuation settings for temporary visa holders working in shortage sectors such as hospitality. Its proposals include simplifying income tax rates, reducing or removing the 15% tax on super contributions, lowering what it describes as “punitive” DASP exit tax rates, and creating a low-balance withdrawal pathway for short-term workers.
If legislative or policy reform is not feasible, ARCA is pushing for a mechanism that returns funds to employers via an 80% superannuation tax reinvestment rebate, delivered as a refundable offset or PAYG credit.
“If government insists on running this as a payroll tax, then it needs to be honest about it,” Lambert said.
“Return the majority of the money to the businesses that generated it and allow them to reinvest in training, technology and productivity.”
He said the issue has attracted limited attention despite, in ARCA’s view, imposing a material cost burden on small hospitality operators.
“Why should a small urban cafe or family-run restaurant pay thousands of dollars in superannuation that a worker will never receive, while Treasury quietly banks the proceeds?” he said. “This isn’t superannuation policy – it’s taxation by stealth, and it’s time it was exposed.”
As a general rule, the government does not comment on pre-budget submissions ahead of the federal budget.
Lambert also argued the complexity of current tax treatment for working holidaymakers and international students was creating confusion around obligations, reducing take-home pay and lifting the risk of non-compliance, particularly among smaller businesses without dedicated payroll support.
Jonathan Jackson, 28th January 2026
