Unfair Australian backpacker tax ruling opens gates for thousands of claims

The 'Backpacker Tax' ruling could open the door to hundreds of thousands of claims. Photo / Getty Images

A UK backpacker has won her court case against Australia's 'backpacker tax'.

The Australian court found that Catherine Addy was unfairly taxed due to her nationality while working as a waitress in Sydney, in 2017.

In a landmark ruling, the court sided with Addy, deeming it discriminatory for her to pay a higher tax rate than Australian residents in the same job.

"The question is whether that more burdensome taxation was imposed on Ms Addy owing to her nationality. The short answer is yes," read the judgement delivered by the High Court of Australia.

"When the position of Ms Addy is compared with that of an Australian national, as it must be, that is the only conclusion which may be drawn."

Addy said the thousands of dollars now owed would make a "huge difference in her life," she told ABC on the verdict.

The so-called 'backpacker' or working holiday visas offered to foreign nationals aged between 18 and 31 have been a mainstay for hospitality and tourism businesses.

There are over 200,000 Work and Holiday and Working Holiday visas issued by Australia every year since 2011.

Addy's case may mean they are now able to ask for a review of their taxes.

Court submissions showed that Addy paid two and a half times the tax of an Australian on the same income - AU$3,986 versus AU$1,591.

Australian nationals enjoy a much lower tax-free threshold and lower rates than those on working holiday visas. However, the plaintiffs said this was not compliant with the "double tax" agreement which Australia has with the UK, New Zealand and other countries, which states that nationals should be taxed like Australians.

Taxback.com, which funded Addy's appeal, told The Times it would consider sponsoring the cases of other backpackers.

"This ruling is likely to have a significant impact on how backpackers are taxed in Australia in the future," the company said.

The backpacker tax case was raised in the federal court in 2019, which was appealed by the tax office.

Addy took the case to the High Court of Australia which has now overturned the 2019 appeal, reinstating the original ruling that the backpacker tax was "unfair" and "discriminatory".