A $48.5 MILLION Tourism Industry Regional Development Fund will be created after the government cut a deal with the independents and the Greens.
Tourism Minister Martin Ferguson announced the fund on Wednesday, thanking the crossbenchers and the minority party for their help to get a tax increase passed.
The money for the fund will come from a tax on international tourists, the passenger movement charge (PMC), and which will also fund a $48.5 million pool to attract Asian tourists.
While the government originally planned that the tax would be increased and indexed to rise every year, that plan was officially abandoned on Wednesday.
The backflip came after a coalition and tourism industry campaign against the indexation of the tax.
On the same day, the government also abandoned another 2012-13 budget measure to increase withholding tax on managed investment trusts, which would have doubled that tax.
Mr Ferguson's office released a statement which said the PMC would still increase from $47 to $55, to raise $485 million over the forward estimates.
The statement said the fund would support community projects which stimulate private sector investment for camping sites and accommodation, likely to be along the same lines as regional development grants.
Tourism and Transport Forum chief executive John Lee said the government's change of heart was a substantial win for the tourism industry.
"We are pleased that we have been able to convince the coalition and the Greens of the damage a yearly increase would have caused to the tourism industry, especially to regional leisure destinations, and we welcome the proposal to redirect more PMC revenue to regional tourism.
"This will see over $40 million allocated to help boost regional tourism through projects such the development of key tourism infrastructure and experiences in regional areas."
The increased tax will return $377 million to consolidated revenue on top of the funds set aside for tourism.