Backpacker tax a form of 'discrimination based on nationality', court rules

Backpacker tax a form of 'discrimination based on nationality', court rules

Backpacker tax a form of 'discrimination based on nationality', court rules

In a landmark decision Wednesday, a Brisbane court ruled the levy - dubbed the "backpacker tax" - can not be applied to a British woman due to a double taxation treaty between Australia and the UK.

It means backpackers would be entitled to a tax-free threshold of $18,200 like any other Australian citizen.

Judge Logan called these parallel rates of income tax "a disguised form of discrimination based on nationality" that is explicitly prohibited in the taxation agreements between Australia and the eight nations in question.

If this amount was paid to the 80,000 working tourists in Oz, the government could face a bill of AU$176 million (£93,806,240). In contrast, foreign workers on 417 or 462 visas are taxed 15% on the first $37,000 they earn.

But the AU$18,200 tax exemption should still apply to anyone living at a permanent address, regardless of their citizenship, as they are classed as residents for tax purposes.

Ms Addy mainly lived in a Sydney sharehouse and stayed, for the most part, in New South Wales - meaning she was considered a "resident" for tax purposes.

While the UK's tax deal with Australia includes a commitment not to impose "more burdensome" rates on its citizens resident there, Ireland's tax deal with Australia omits this specific protection.

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The federal court in Australia has ruled that the so-called "backpacker tax" could not be levied against some backpackers because it violated pre-existing agreements with some countries.

"It also damaged Australia's reputation as a working holiday destination", Joanna Murphy, the firm's CEO, said.

'In the context of these working holidaymakers, this is a really significant judgement'.

Australian broadcaster ABC said an estimated 75,000 foreign nationals could receive hundreds of millions of dollars from the Australian Tax Office (ATO).

"We're delighted the Court has accepted our argument and we look forward to the Australian Government restoring the previous - fairer and non-discriminatory - taxation arrangements that apply to holiday workers", she said.

While this initial ruling does not affect Irish people on working holiday visas, Taxback.com, who organised the lawsuit, believe it could have a knock-on effect in the future.

However, this interpretation is likely to also face challenge, based on another of Logan's recent rulings in which he said a backpacker who meant to move to Australia for 10 months, and does so, would become a resident for tax purposes.

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