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- The Australian High Court rules that the ‘backpacker tax’ cannot be imposed on citizens of specified foreign nations
- Catherine Addy contested Tax Office assessments that subjected her income to 417 visa restrictions
- The court ruled that the tax discriminated against her because of her nationality and violated a convention Australia struck with the United Kingdom
- An ATO spokesperson says it is currently considering the decision
- Joanna Murphy, CEO of Taxback.com, welcomes the decision saying the tax was introduced in 2016 against the wishes of the agricultural sector
The Australian High Court has today reiterated a landmark court judgement from October 2019 that ruled that the ‘backpacker tax’ cannot be imposed on citizens of specified foreign nations.
Catherine Addy, who worked as a waiter in Sydney between August 2015 and May 2017, contested Tax Office assessments that subjected her income to 417 visa restrictions, which levy a 15 per cent tax rate on income up to $37,000, with a maximum liability of $5550.
The court ruled that the tax discriminated against her because of her nationality and violated a convention Australia struck with the United Kingdom.
The ruling indicates that the Australian Taxation Office will be required to repay taxes received from up to 75,000 backpackers who worked in Australia.
The tax burden for an Australian citizen earning taxable income from the same source over the same time period was lower.
An Australian person was entitled to a tax-free threshold of $18,200, after which he or she was taxed at 19 per cent up to $37,000, with a maximum tax liability of $3572.
This ruling applies only if the working holidaymaker is both an Australian resident for tax reasons and a citizen of Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany, or Israel.
Visitors from these countries account for over half of all visitors to Australia on 417 or 462 Working Holiday Visas.
An ATO spokesperson said it is currently considering the decision.
“Working holiday makers who may potentially be affected by this decision are encouraged to check the ATO website for updated guidance prior to lodging or amending a return or lodging an objection,” they said.
“Employers should continue to follow rates in the published withholding tables for working holiday makers until we update the ATO website with further guidance.”
“A working holiday maker’s residency status for tax purposes is determined by the taxpayer’s individual circumstances. Most working holiday makers will be non-residents consistent with their purpose of being in Australia to have a holiday and working to support that holiday.”
Taxback.com, a multinational tax accountancy firm, launched the long-running legal challenge to the backpacker tax. The Australian Federal Court ruled in October 2019 that the tax violated non-discrimination terms in tax treaties made by Australia with each of those nations.
While the ATO first prevailed in its appeal of the Court’s judgement, the High Court today reiterated the original judgement.
Joanna Murphy, CEO of Taxback.com, welcomed the decision saying the tax was introduced in 2016 against the wishes of the agricultural sector and breaches international tax agreements.
“In upholding the Court’s ruling that the Backpacker Tax is invalid in many cases, the Full Bench has confirmed important protections for foreign citizens choosing to work while holidaying in Australia,” she said.
