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British waitress wins legal battle against Australia’s ‘backpacker tax’ | Tax

A British backpacker who labored as a waitress in Sydney has received a long-running legal dispute against Australia’s “backpacker tax” in its highest court docket.

On Wednesday the excessive court docket ruled in favour of Catherine Addy, discovering the tax which slugged working holiday-makers 1000’s of {dollars} greater than Australians discriminated against her on the idea of her nationality and infringed a treaty Australia signed with the UK.

The choice doubtless means the Australian Taxation Office should pay again taxes collected from as much as 75,000 backpackers who labored in Australia, which has related treaties with Chile, Finland, Japan, Norway, Turkey, Germany and Israel.

In December 2016 Australia legislated the backpacker tax charging working holiday-makers 15% on the primary $37,000 they earn a 12 months, a most legal responsibility of $5,550. Australians are entitled to a tax-free threshold for the primary $18,200 they earn and are solely liable to pay as much as $3,572 in the event that they earn $37,000.

Addy spent almost two years in Australia between August 2015 and May 2017, incomes $26,576 as a meals and beverage waitress in Sydney within the 2017 tax 12 months.

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In October 2019 Addy received a problem within the federal court docket arguing the tax discriminated against her on the idea of nationality and breached the Australia-UK treaty on avoidance of double taxation. In August 2020 the full federal court overturned the choice.

Addy appealed to the excessive court docket, arguing that if the backpacker tax had utilized for the complete 12 months she earned $26,576, she would have been slugged $3,986 in contrast with an Australian who would pay simply $1,591.

On Wednesday 5 justices of the excessive court docket unanimously allowed Addy’s attraction, discovering that “more burdensome taxation” had been imposed on her resulting from her nationality.

“When the position of Ms Addy is compared with that of an Australian national, as it must be, that is the only conclusion which may be drawn,” they stated.

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“She did the same kind of work and earned the same amount of income from the same source; yet an Australian national was required … to pay less tax.”

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The ATO stated the choice was “only relevant” to holiday-makers who have been “both an Australian resident for tax purposes” and from one of many eight international locations with related tax treaties.

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“Most working holiday makers will be non-residents as they are in Australia to have a holiday and working to support that holiday,” it stated in an announcement.

“This decision will not change the tax rates for the majority of working holiday makers.”

The ATO suggested employers to proceed utilizing present withholding charges till they’re up to date and dealing holiday-makers to attend for steering “prior to lodging or amending a return or lodging an objection”.

Joanna Murphy, the chief government of Taxback.com, a global tax accounting and advisory agency that helped Addy carry the case, welcomed the excessive court docket choice.

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“The court has reaffirmed important protections for foreign citizens choosing to work while holidaying in Australia,” Murphy stated in an announcement.

“It was always clear to us when this tax was introduced in 2016, against the wishes of the agricultural sector, that it breached a number of international tax agreements.

“It also damaged Australia’s reputation as a working holiday destination.”

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