Briton wins legal battle against ‘backpacker tax’ in Australia | Tax
A British backpacker who worked as a waitress in Sydney has won a long-standing dispute against Australia’s “backpacker tax” in her highest court.
The High Court ruled in favor of Catherine Addy on Wednesday, ruling that the tax that cost working holidaymakers thousands of dollars more than Australians discriminated against her on the basis of her nationality and violated a treaty signed by Australia with the United Kingdom.
The ruling likely means that the Australian Taxation Office will have to reimburse taxes collected from 75,000 backpackers who have worked in Australia, which has similar treaties with Chile, Finland, Japan, Norway, Turkey, Germany. and Israel.
In December 2016, Australia passed backpacker tax legislation imposing 15% on the first $ 37,000 they earn on the first $ 37,000 they earn per year, to a maximum liability of $ 5,550. Australians are entitled to a tax-free threshold for the first $ 18,200 they earn and are only required to pay up to $ 3,572 if they earn $ 37,000.
Addy spent almost two years in Australia between August 2015 and May 2017, earning $ 26,576 as a food and drink waitress in Sydney in the 2017 tax year.
In October 2019, Addy won a challenge in federal court, arguing that the tax discriminated against her on the basis of nationality and violated the Australia-UK Double Tax Avoidance Convention. In August 2020, the full federal court overturned the decision.
Addy appealed to the High Court, arguing that if the backpacker tax had applied for the entire year she made $ 26,576, she would have received $ 3,986 compared to an Australian woman who would only pay $ 1 $ 591.
On Wednesday, five High Court judges unanimously upheld Addy’s appeal, arguing that a “heavier tax” had been imposed on him because of his nationality.
“When Ms Addy’s position is compared to that of an Australian national, as it should be, that is the only conclusion that can be drawn,” they said.
“She was doing the same kind of work and earning the same amount of income from the same source; yet an Australian national was required … to pay less tax.
The ATO said the ruling was “only relevant” to holidaymakers who were “both an Australian resident for tax purposes” and one of eight countries with similar tax treaties.
“Most of the working vacationers will be non-residents as they are in Australia on vacation and working to support that vacation,” he said in a statement.
“This decision will not change the tax rates of the majority of working holidaymakers. “
The ATO advised employers to continue using existing withholding rates until they are updated and vacationing workers to wait for guidance “before filing or amending a return or filing an objection. “.
Joanna Murphy, managing director of Taxback.com, an international accounting and tax advisory firm that helped Addy bring the case, welcomed the High Court ruling.
“The court reaffirmed important protections for foreign citizens who choose to work while on vacation in Australia,” Murphy said in a statement.
“It was always clear to us when this tax was introduced in 2016, against the will of the agricultural sector, that it violated a number of international tax agreements.
“It has also damaged Australia’s reputation as a working holiday destination.