Some foreign travellers are likely to benefit from a recent ruling by Australia’s High Court that found the backpacker tax to be discriminatory. Following the filing of a case by a British woman who claimed she was unfairly taxed during the time she worked as a waitress in Sydney in 2017, the High Court found that her nationality did play a role in imposing the burdensome taxation.
The backpacker tax applies to travellers to Australia that are on working holidays. That is for those that qualify for 417 visas. Before 2020, the 15% tax was applied on up to the first $37,000 in income made for each year. From 2020, the tax has been applied on incomes of up to $45,000. This taxed amount is higher than what is applied to resident taxpayers, who have a tax-free threshold of $18,200.
The complainant, Catherine Addy, argued that this tax contravened an international “double tax” agreement that exists between Australia and several other nations, including Britain. Other countries like Chile, Germany, Finland, Japan, Israel, Norway, and Turkey also have similar treaties in place. These agreements require working holidaymakers from said countries to be taxed in the same way as Australians.
According to Ms Addy’s legal team’s calculations, she paid $3,986 in taxes for the period that she worked. Whereas an Australian with the same earnings would have had to pay just $1,591. The ruling may now make it possible for other backpackers from these countries to request the Australian Tax Office (ATO) to reassess their tax filings.
The ATO has confirmed that the decision was only relevant to cases of working travellers that have been resident in Australia for tax purposes since 2017. The ATO had also argued during the case that there was no discrimination based on nationality and that the backpacker tax was intended to protect those on working holidays from higher taxes that were typically imposed on other foreign workers. It is still reviewing the decision but does not expect it to affect most working backpackers who are non-residents. They added that those from the specified countries that were residents for tax purposes would be provided guidance through the ATO website soon.
Ms Addy received support in her action from the global tax services provider, Taxback.com. The platform contends that the tax has discouraged some working holidaymakers from taking up seasonal picking work when travelling to Australia. It remains to be seen how this ruling will impact the flow of such travellers at a time the country is looking to reopen its borders to foreign nationals.
Contact Accountancy Insurance
We would love to hear from you.
About Accountancy Insurance:
Thousands of accounting firms offer our tax audit insurance solution, Audit Shield to their clients. Find out why.