The Australian government on Monday says it will support imposing a 15 per cent tax rate on working holiday visitors from overseas.
The new "backpacker tax" proposal is lower than the government's original plan for a 32.5 per cent rate, which angered tourism and farming operators.
They feared taxing temporary workers 32.5 cents on every dollar would make it unattractive to come to Australia.
About 600,000 backpackers travel to Australia every year, many of them finding work picking fruit.
At present backpackers, like Australian workers, do not pay any tax until their yearly income exceeds A$18,200 (£11,000, $13,500).
Treasurer Scott Morrison said the government had reached a compromise deal with independent crossbenchers.
"Today the government will be working to put in place a bill which will propose 15 per cent on the backpackers' arrangement," he said in Canberra on Monday.
"We will honour the arrangement that we've come to with Senator (Nick) Xenophon and we appreciate his continued support on this, as well as Senator (Derryn) Hinch."
The announcement comes after more than a year of political manoeuvring between the government, opposition and minor parties.
Last week, independent senator Jacqui Lambie's proposal for a 10.5 per cent tax rate was blocked by the House of Representatives.
Government MP Andrew Broad broke ranks on the weekend to suggest a 15 per cent rate, declaring the issue had to be settled before the new year.
Morrison said lowering the rate to 15 per cent would cost the Australian budget A$120 million over four years.
The opposition said it continued to support a 10.5 per cent tax like New Zealand, arguing Australia risked turning away working holiday-makers.
"When European backpackers look towards Australia and New Zealand … they just look at the headline rate," said opposition agriculture spokesman Joel Fitzgibbon.
Australia granted 214,830 working holiday visas in 2014-15. British citizens, the programme's biggest constituency, were granted 44,730 visas.
Australia's department of immigration website estimates working holiday visas cost approximately A$520; according to BBC.
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Source: The Financial Express