UK citizen wins landmark High Court case against 'Backpacker Tax'

The suit argued that the tax contravenes a treaty with the UK

UK citizen wins landmark High Court case against 'Backpacker Tax'

A UK citizen who worked as a waitress in Sydney has won her High Court case against the country’s “Backpacker Tax.” The victory follows a long-running claim against her by Australian taxing authorities, which began in 2017.

Catherine Victoria Addy is a UK citizen who lived in Australia from August 2015 until May 2017. She held a Subclass 417 visa.

In 2016, the Commonwealth Parliament enacted the Income Tax Rates Amendment Act 2016, also known as “the Backpacker Tax,” which took effect from 1 January 2017.

The Backpacker Tax applies to persons who earn income with an Australian source while holding either a Subclass 417 or Subclass 462 visa. Both visa types are considered Working Holiday visas.

The Act also states that “anyone on a working holiday visa must pay a 15% tax on the money they earn up to £20,000. Meanwhile, Australian citizens get a tax-free threshold of £9,938,” the Evening Standard reported.

In 2017, Addy worked as a waitress and was taxed on her income. She claimed she had been “unfairly taxed on the basis of her nationality” since an Australian national in the same circumstances would be taxed less than her.

Addy’s lawyers argued that the imposition of Backpacker Tax contravened a treaty that Australia has with the United Kingdom known as the “Double Tax Agreement.”

The agreement contains a non-discrimination clause “to prevent more burdensome taxation of nationals of the United Kingdom.” The treaty essentially requires UK citizens to be taxed equally to Australian nationals “in the same circumstances, in particular to residence.”

The High Court ruled in Addy’s favour and ruled that “the more burdensome taxation was imposed on [Addy] owing to her nationality and, for that reason, contravened [the United Kingdom convention].” The judgment was handed down on 3 November 2021.

The tax had been regarded as a “disincentive to working holiday-makers to take up much-needed seasonal picking work while visiting Australia,” told the BBC.

As to possible implications, “the ruling could pave the way for the thousands of British backpackers who have worked on the 417 visa to seek claims,” Evening Standard said in its report.

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