Australian court rules higher backpacker tax is discriminatory

Australian court rules higher backpacker tax is discriminatory
Australian court rules higher backpacker tax is discriminatory

Thomson Reuters

Australia's High Court found that the country's practice of taxing young working tourists at a higher rate than local Australians for the same work was discriminatory on Wednesday.

The case brought by British backpacker Catherine Addy who worked as a waitress in Sydney in 2017, sought to show that she was treated unfairly because of her nationality when she had to pay a higher tax rate compared to Australian residents.

Addy argued that having earned 26,576 Australian dollars between January and May 2017 she should have had access to the same tax-free threshold as Australian residents, rather than having been taxed at a 15% flat rate, the Australian Broadcasting Corp (ABC) reported.

Australian residents don't pay tax on the first A$18,200 of their earnings.

Irish initiated case

The legal action against the Backpacker Tax was initiated in January 2017 by Irish tax and accounting firm Taxback.com.

Australia has an agreement that foreign nationals working in the country should not suffer a higher tax burden than local workers for the same work.

The High Court found in Addy's favour.

"The tax rate was more onerous for Ms Addy, a national of the United Kingdom, than it was for an Australian national in the same circumstances – doing the same work, earning the same income, under the same ordinary taxation laws," the judgment said.

The so-called "backpacker tax" was set down in 2017 and applies to young people on working holiday visas between the ages of 18 and 31. They are often employed in industries like hospitality and fruit picking and the judgement comes just as Australia prepares to reopen its borders to travellers.

The case may now cause other backpackers to request a review by the Australian Tax Office.

Irish workers

The Australian Tax Office said it was considering the decision and would provide further guidance as soon as possible, according to the ABC.

Joanna Murphy, chief executive of Taxback.com said the court's decision "comes after four years of hard work behind the scenes between Taxback.com and our legal counsel and we are glad to be able to finally draw a line under the court proceedings. However, we will continue to lobby for the judgment to be applied across the board, and we are confident that today’s outcome will positively impact Irish backpackers in the near future, based on the fact that tax treatment of backpackers is usually common regardless of which country they come from.”

“Travelling and working around Australia has long been a rite of passage for Irish people – 37,041 Working Holiday (417) Visas have been issued to Irish people since 2017[1], when the tax originally came into effect.

“In our view, it was very clear when the tax was introduced in 2016, that it discriminated against foreign workers and breached several international tax agreements. It also damaged Australia’s reputation as a working holiday destination,” Ms Murphy said. - Reuters

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