IN a surprise move that has blindsided farming groups, the Senate today rejected the Government’s proposed 15 per cent tax for backpackers and seasonal workers.

The Senate voted 35-32 to reject the compromise tax rate after it was widely expected that the new proposal would pass.

The Labor Party moved an amendment for a 10.5pc tax which was passed in the Senate with the support of Labor, the Greens, independent senators Jacqui Lambie, Derryn Hinch and David Leyonhjelm, and One Nation senator, Rod Culleton.

The amended bill will now go back to the House of Representatives, where it is likely to be defeated. The government earlier rejected Labor’s 10.5pc proposal last week.

If it is not passed in the Lower House, by default the tax will revert to the original level of 32.5pc that the government had initially proposed in the 2015 budget.

Following strong opposition from the farming sector, the government changed its position to calling for the tax to be 19pc before agreeing on Monday to again lower the rate to 15pc in the hope of gaining enough cross-bench support to get it through parliament.

Responding to today’s unexpected outcome, the National Farmers’ Federation (NFF) said it stood by its support for a 15pc backpacker tax.

“We believe that this rate is fair, internationally competitive and recognises the unique nature of seasonal work,” NFF chief executive officer, Tony Mahar, said.

“We don’t believe that backpackers should pay less tax than those on the Seasonal Worker Program.

“Our members will not be bullied on this issue and today’s antics in the Senate show contempt for farmers and growers in desperate need of a resolution.

“Enough is enough. We need this issue put to bed, once and for all.”

Victorian Farmers Federation (VFF) horticulture vice president, Emma Germano, said the Senate had made a mockery of the political process with its refusal to resolve the backpacker tax.

“This has been a disastrous result for the agriculture industry and I hope the Senate is comfortable in the knowledge that they could have destroyed this season’s harvest for many hardworking farmers,” she said.

Ms Germano said the bitter stalemate was putting the agriculture sector under increasing stress as many farmers struggled to find reliable temporary labour.

“There is no question that this ugly fight has caused tremendous damage to our reputation,” she said.

“We have already seen a drop-off in backpacker numbers, and with much of the harvest already in full swing, many farmers are struggling to find the labour.”

WAFarmers chief executive officer, Stephen Brown, said industry was desperate for a solution to the long-running backpacker tax issue, with only two sitting days remaining for the year in which a resolution could be determined.

“WAFarmers, alongside the National Farmers’ Federation, stands by our support for the Coalition’s recent 15 per cent compromise on the backpacker tax as we believe it is a fair, reasonable and competitive figure,” he said.

“We are furious that this has not been resolved, when it is so clearly a time-sensitive issue of critical importance to the future of multiple industries.

“The issue has been dragged out for 18 months during which time backpackers have chosen other destinations for their working holidays, leaving producers in the lurch and gaping holes in the tourism and hospitality sectors, plus the greater Australian economy.

“This additional delay demonstrates further contempt for the agricultural industry.”