Backpackers could take millions from the government
AN ASPIRING British actor's tax case could cost the Federal Government millions of dollars after courts backed a loophole in the controversial "backpacker tax".
In a landmark test case, the Federal Court ruled in favour of former Pommy backpacker Catherine Addy and opened the door to tens of thousands more challenges.
The government may be forced to pay back tax to impacted backpackers.
The backpacker tax, introduced in 2016, charges working holiday makers in Australia tax at 15 per cent from the first dollar they earned.
But Justice John Logan yesterday ruled it breached tax treaties with countries like the US, UK and Germany.
"That is a disguised form of discrimination based on nationality," he said.
It means backpackers would be entitled to a tax-free threshold of $18,200 like any other Australian citizen.
International accounting firm Taxback.com initiated the case using Ms Addy, now studying drama back in London, and claimed it meant the tax was now invalid.
The UK, the US, Germany, Finland, Chile, Japan, Norway and Turkey all have tax treaties with Australia and make up about half of all visitors to Australia under working holiday visas.
There have been about 84,000 backpackers from those countries each year since 2017 from those countries, according to Home Affairs department data.
Justice Logan ordered the Australian Taxation Office to reassess Ms Addy's tax bill, which could be cut from about $3000 to a few hundred dollars.
Taxback.com CEO Joanna Murphy said the ruling effectively meant the backpacker tax should not apply to working holiday makers from those eight countries.
"We're delighted the Court has accepted our argument and we look forward to the Australian Government restoring the previous - fairer and non-discriminatory - taxation arrangements that apply to holiday workers," she said.
An ATO spokesman said it would consider if they would appeal the decision.
He said it would not impact all backpackers from the UK and other countries, only those who were considered residents while staying here.
"Residency status depends upon on the circumstances applying to each individual working holiday maker," he said.
In the test case, Ms Addy proved she had a permanent place of residency where she was staying while in Australia.
Comment is being sought from the Treasurer.