Under the deal hammered out by Treasurer Scott Morrison and Nationals leader Barnaby Joyce, the plan to impose a 32.5¢ tax rate on backpackers from the first dollar they earn while working in Australia - rather than when they pass the  $18,200 tax-free threshold - has been walked back.

Instead, a 19¢ rate will apply and the revenue foregone under the change will be made up by a $5 increase in the passenger levy that applies to some flights.

The tourism sector will also get a $10 million hand out to market jobs to backpackers.

Cabinet ticked off on the changes to the backpacker tax, which was announced by former treasurer Joe Hockey in his 2015 budget and had been due to to start on July 1, on Tuesday.

Earlier this month, Mr Morrison said that if there were to be changes to the tax, "it is my view as Treasurer they will be made in a way that does not disadvantage the budget".

The compromise deal appears to have ensured that no revenue will be foregone.

Minister for Agriculture and Water Resources Barnaby Joyce said the win on backpacker tax is a win for farmers who can get their fruit off the tree, off the vine and off to market.

“The decision to reduce the proposed tax rate from 32.5 per cent to 19 per cent tax maintains Australia’s status as one of the most competitive destinations for working holiday makers, while ensuring they pay a fair level of tax,” Mr Joyce said.

“Australia’s Working Holiday Maker programme provides a vital source of labour, particularly across the agriculture and tourism sectors.

“The peak tourism and harvest season is ahead of us - from mangoes, lychees, bananas and avocadoes in the north, to asparagus, cherries and berries in the south.”

Assistant Minister to the Deputy Prime Minister, Luke Hartsuyker, said the government had remained committed to resolving the issue quickly and fairly.

“More than 1700 stakeholders contributed to the review through written submissions and face to face consultations. They made it clear that an early resolution to the tax rate issue was needed.

“Today’s outcome has been made with an informed understanding not only of the labour challenges facing our agriculture and tourism sectors, but also the challenges facing the Australian economy in a global labour market.”

National Farmers’ Federation (NFF) president Brent Finlay said the agriculture sector warmly welcomed today’s announcement.

“The NFF has always advocated for a rate of 19 per cent as a fair and reasonable measure,” Mr Finlay said.

“We are delighted today to see government listen to its constituency and not put in place a tax that would have hurt farm production and, ultimately, the Australian economy.

“We have consistently said agriculture simply cannot do without backpackers and, following today’s announcement, we can again go to the working holiday maker community and say that coming to work on our farms is worth it.

“We are also greatly heartened to demonstrate that, when an industry as a whole works together, we can achieve national advocacy outcomes that are positive for both our sector and the broader Australian economy.”

Mr Finlay said while he acknowledged there would be some changes to working holiday makers’ superannuation, the measures announced by the government today were sensible and reflective of the needs of both backpackers and the farm sector.

“The nature of these types of working arrangements is that farmers need an immediate, temporary workforce and backpackers want immediate cash in their pockets to spend while travelling - so the approach taken makes sense.

 “We now look forward to seeing further detail of today’s announcement and working with government to make sure we have backpackers coming to our country who are eager to work on our farms and contribute to our rural and regional communities.”