Australia ‘backpacker tax’: court rules taxing of ‘working holidaymakers’ is illegal

The Australian government has been illegally taxing foreign workers from eight different countries, a court has ruled.

Thursday, 31st October 2019, 3:14 pm
Updated Thursday, 31st October 2019, 3:14 pm

Since 2017, “working holidaymakers” from the UK, US, Germany, Finland, Chile, Japan, Norway and Turkey have faced a controversial 15 per cent tax on their income.

The court found that existing treaties with those eight countries meant that their citizens employed in Australia must be taxed in the same way as Australian nationals.

The ruling means tens of thousands of people who worked in Australia using category 417 or 462 visas could be owed money from the government.

The ‘backpacker tax’ repayments bill could cost the Australian government hundreds of millions of dollars.

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The ‘backpacker tax’ repayments bill could cost the Australian government hundreds of millions of dollars.

‘Discrimination based on nationality’

Australian nationals do not pay tax until their yearly salary exceeds A$18,200 (£9,700).

But under the unlawful rules imposed by the Australian government in 2017, foreign nationals working in the country on 417 or 462 visas were taxed 15 per cent on the first A$37,000 they earned.

Justice John Logan, who presided over the case in Australia’s Federal Court, ruled that the tax was illegal, and described it as "a disguised form of discrimination based on nationality".

But the Australian Tax Office said the ruling only affected a small minority of foreign nationals who were classed as “working holiday-makers who are also residents”.

Catherine Addy, a British tourist who worked as a waitress in Sydney, initiated the challenge to the law through an international tax company, and said she was pleased with the court’s decision.

She told Australian broadcaster ABC News that “it is wrong that foreigners should be taxed more harshly than Australians when they are doing the same work."

How much is tourism worth in Australia?

According to BudgetDirect, 8.5 million international visitors travelled to Australia in 2018, and spent almost A$44 billion in that year alone.

That figure has almost doubled since 2009, and by the end of 2019, the figure is projected to reach more than 10 million.

Currently 970 people arrive into Australia every single hour.