The federal government is reviewing the proposal that would make people working on a holiday visa pay 32.5 cents in the dollar in tax.

The plan, which includes abolishing the current $18,200 tax free-threshold, is expected to generate $540 million over three years.

Deputy Premier Jeremy Rockliff wrote to Assistant Minister to the Deputy Prime Minister Luke Hartsuyker last week about the state government’s concerns on the tax’s impacts.

Mr Rockliff said the tax hike would disproportionately affect businesses and industries in the state’s rural and regional areas.

He said there was a high concentration of agriculture, horticulture and tourism industries in these areas and they relied on labour provided by backpackers during peak periods.

Mr Rockliff said feedback he had received indicated that the state would lose out to New Zealand if the change was made.

The country charges backpackers a 10.5 per cent tax rate.

Fruit Growers Tasmania business development manager Phil Pyke said businesses were already seeing a decline in backpacker visitation along the country’s harvest trail.

“If Tasmania fails to attract the necessary itinerant workforce, and fruit or indeed vegetables cannot be harvested, then this is a failure of the federal government,” he said.

He said fruit growers believed that a tax rate of 19 per cent was acceptable to both industry and backpackers.

The federal government plans to introduce the tax on January 1, 2017.

It was intended to be introduced on July 1 this year before the government was forced to review the idea following backlash from the agricultural and tourism industries.

Opposition Leader Bryan Green said doubted that the government would change its mind on the issue.

“They’ve already got the tax banked in the budget so it would appear that they’ve already made a decision.”

Tourism Industry Council Tasmania chief executive Luke Martin said Tasmania was the most tourism dependent state economy with around 9.6 per cent of gross state product coming directly and indirectly from tourism.

He said 44,000 backpackers spent $79 million in the state over 2015-16.