THE Australian Taxation Office (ATO) has formally appealed against a Federal Court ruling that Australia’s controversial backpacker tax was discriminatory and violated a number of international tax treaties (TD 31 Oct).
The tax was first implemented in 2016 and resulted in backpackers no longer being eligible for the tax-free threshold on their earnings while in Australia, with foreigners on 417 or 462 visas paying 15% tax on incomes less than $18,200.
However, the ATO has remained resolute in the face of the decision, advising employers that they should continue to administer the 15% tax until the appeals process is exhausted, stating that their “obligations have not changed”.
“Employers should apply the PAYG withholding tax rate in accordance with their employees’ Tax File Number declaration,” the government agency said.
“Working holiday makers who may potentially be entitled to a refund are encouraged to wait until the appeal has been decided before seeking a refund, amending their return or objecting,” the ATO added.
The ruling, and any decision relating to the appeal, would only affect backpackers from major source market nations Chile, Finland, Germany, Japan, Norway, Turkey and the United Kingdom, with Australia receiving close to 40% of workers on holiday-maker visas from these countries.
The ATO has previously stated it expects approximately 5% of working holidaymakers to be entitled to have their “return amended” if its appeal in the Federal Court was to be unsuccessful, encouraging backpackers to monitor the ATO website for updates.
The case was originally brought forward by British backpacker Catherine Addy (TD 05 Dec 2017), who received a tax bill from the Australian Taxation Office upon her return to the UK, with the ATO claiming she was a “resident” for tax purposes during her stay because she had lived in a share house in Sydney.
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Source: traveldaily