Australia’s highest court has ruled against the country’s so-called backpacker levy, finding it in breach of tax treaty clauses with the United Kingdom.
Under an agreement between Britain and Australia introduced in 2017, backpackers paid a flat rate of 15 per cent on income up to $37,000, without the benefit of the tax-free threshold accessible to Australian workers.
Other backpackers affected by the same rule have been waiting on the court’s decision.
British backpacker Catherine Addy appealed a 2020 Federal Court ruling that sided with the Australian Taxation Office and upheld the levy’s validity.
The High Court on Wednesday found it imposed a more burdensome taxation requirement on Ms Addy because of her nationality.
Australian taxpayers are entitled to a tax-free threshold of $18,200.
For this reason, the levy was found to contravene a tax treaty clause with the United Kingdom regarding double taxation.
“The tax rate was more onerous for Ms Addy, a national of the United Kingdom, than it was for an Australian national in the same circumstances – doing the same work, earning the same income, under the same ordinary taxation laws,” the ruling said.
Ms Addy was in Australia on a working-holiday visa between 2015 and 2017.
In 2017, she worked as a waitress in Sydney and was an Australian resident for tax purposes.
– with AAP