If you are a backpacker or travelling in Australia on a working holiday visa, you could be entitled to a tax refund!
The high court decision on the Addy’s case ruled that certain classes of visa holders are entitled to be taxed at the low tax rates as Australian residents.
What is Addy’s Case?
Addy is a British resident that came to Australia on a working holiday and appealed against the backpacker tax as discriminatory in contravention to Article 25 of the UK double tax treaty (UK DTT).
The ATO generally considers holders of working holiday visas non-residents of Australia, even if they work here for more than 6 months, as the prime purpose of their stay in Australia is for holiday purposes.
Backpacker tax refers to the income tax of 15% flat on the first $37,000 of income for holders of working holiday visas. Whereas Australian residents receive a tax-free threshold of $18,200 and a 19% tax rate on income between $18,200 to $37,000.
Addy believed this was unfair and. Article 25 of the UK DTT states that British Citizens should not be subjected to any taxation or any requirement that is “more burdensome” than those applicable to Australians in the same circumstances.
What was the Court’s decision?
On appeal, the High Court unanimously allowed Ms Addy’s appeal and found that Addy was eligible for the tax-free threshold and tax rates of an Australian resident.
Who does the backpacker tax relief apply to
The Addy’s decision applies to travellers who
• Hold 417 Working Holiday
• Hold 462 Work and Holiday (backpackers).
• Australian residents for tax purposes (see also our article on Australian Tax Residency)
• from DTT countries
Which are the double tax treaty countries
Countries with DTT with Australia include:
• Germany (for 2017–18 and later income years)
• Israel (for 2020–21 and later income years)
• United Kingdom.
Who are not eligible for the backpacker tax relief
As the High Court did not find the backpacker tax itself discriminatory, the backpacker tax (ie, 15% flat on the first 37,000 income) will remain for working holiday makers who are not from the DTT countries.
How Wilson & Assoc can help?
Our taxation and advisory services can assist you understand the process and what can be done moving forward. This includes providing you an outline of the potential refund increase, completing your amendments, lodgements and submitting objections on your behalf for relevant returns dependent on the timeframe you held a working visa in Australia.
If you’re interested schedule a call with us now. We are always happy to help!
Source: Australian Tax Office
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