An estimated 75,000 backpackers could receive hundreds of millions of dollars from the tax office after the Federal Court ruled the Government’s so-called backpacker tax invalid.
The landmark ruling said the tax was a “form of discrimination based on nationality” and could not be applied to a British woman living in Australia on a working holiday visa because it was in contravention of a non-discrimination clause in a double taxation treaty between the UK and Australia.
Similar treaties exist between Australia the United States, Germany, Finland, Chile, Japan, Norway, and Turkey.
The tax on working holiday-makers has meant that, to date, any foreigner on 417 or 462 visas earning less than $18,200 has had to pay 15 per cent tax, unlike Australians who are not taxed on similar earnings.
Each year about 150,000 foreigners come to Australia on working holiday visas, meaning the case could potentially impact upon half of those who worked here between the 2017 and 2019 financial years.
ATO to consider decision
A spokesperson for The Australian Tax Office said it would consider the decision and whether an appeal was appropriate.
“It is important to note that this decision does not affect the Working Holiday Makers [WHM] tax rate applying to WHMs who are non-residents,” they said.
“We consider most working holiday-makers are not residents for tax purposes and this decision has no impact for these working holiday-makers.
“This decision only affects the tax rates applying to a minority of WHMs who are also residents, and only those from countries affected by a similar clause in the double tax agreement with their home country.
“If the decision is not appealed, these taxpayers will be treated the same as other Australian tax residents, that is, entitled to the benefit of the tax-free threshold of $18,200, after which marginal rates of tax apply, starting at 19 cents in the dollar.
“Residency status depends upon on the circumstances applying to each individual working holiday-maker.”
Assistant Treasurer Michael Sukkar said it would be a matter for the Commissioner of Taxation to determine whether he would appeal the decision.
“The Government will await the finalisation of any legal process before considering if any policy response is needed,” he said.
Source: ABC NEWS