Australia’s High Court has ruled that the higher tax rate for working tourists is discriminatory and violates a treaty with the United Kingdom.
In Australia’s highest court, a British backpacker who worked as a waiter in Sydney won a long-running legal battle against the country’s “backpacker tax.”
On Wednesday, the Supreme Court found that the tax that charged working vacationers thousands of dollars more than Australians discriminated against Catherine Addy based on her nationality and breached a treaty Australia signed with the UK.
What Was the Backpacker Tax?
The controversial tax, which went into effect in January 2017, removed the tax-free threshold of $18,200 for backpackers in Australia on a 417 or 462 Working Holiday Visa.
Instead of a tax-free threshold, a 15% tax rate was imposed on all income generated up to $37,000. Additionally, earnings above $37,000 were subject to a higher tax rate. To put it another way, travellers paid more in taxes than Australian citizens.
Several rural farms and businesses that rely on seasonal workers have found it more difficult to find workers since implementing the Backpacker Tax in Australia.
What Will Happen Next?
The Australian government is expected to start withdrawing non-discriminatory taxation arrangements for the countries covered by the bill soon. This decision should also serve as a precedent for the future, since it is exceedingly rare for a government to have different tax systems for countries from similar territories.
Who Can Claim a Tax Refund?
According to the Australian High Court, the Backpacker Tax cannot be lawfully applied to nationals of the United Kingdom, the United States, Germany, Finland, Chile, Japan, Norway, and Turkey.
Therefore, backpackers who worked in Australia, which has treaties with Chile, Finland, Japan, Norway, Turkey, Germany, and Israel, are likely to have to pay back taxes that the Australian Taxation Office collected from up to 75,000 of them.