Working holidaymakers could be entitled to generous refunds worth hundreds of millions after a British woman won a landmark court case against the Australian Tax Office.
Four years after arriving Down Under, Ms Addy won a Federal Court battle with a judge condemning the Australian Taxation Office for discriminating against UK citizens.
Thousands of backpackers could soon be entitled to generous refunds worth hundreds of millions after a British woman has won a landmark court case against the Australian tax office
She stands to be refunded more than $2,200, with the ATO still undecided on whether it will appeal the verdict.
The decision could have wide-ranging ramifications for the 80,000 working holidaymakers living in Australia and not just visiting for a few weeks.
If Ms Addy’s $2,200 payout were to be handed to the 80,000 working holidaymakers in the country, the government would be looking at a $176million bill.
Tax agent H&R Block’s director of tax communications Mark Chapman described Justice John Logan’s judgement as a landmark result that could see thousands of working holiday tourists get tax refunds – adding up to thousands of dollars for individuals.
‘In the context of these working holidaymakers, this is a really significant judgement,’ he told Daily Mail Australia.
‘There are a lot of them. There would tens or even hundreds of thousands here on these working holidaymaker visas and a proportion of them would actually qualify as residents based on their circumstances.’
Under laws introduced in January 2017, visitors on working holiday visas were no longer entitled to have a tax exemption on the first $18,200 they earned.
Catherine Addy, a 27-year-old UK citizen from London, initially came to Australia in 2015, holidaying in Cairns and Brisbane before renting in Sydney
Instead, they have to pay a 15 per cent tax rate on every dollar they earn up to $37,000, if they held a 462 or 417 visa.
Visitors to Australia, however, are entitled to the $18,200 tax-free exemption if they live in Australia at a permanent address, making them residents for tax purposes.
In Ms Addy’s case, Justice Logan accepted that renting at a share house at Earlwood in Sydney’s inner-west meant she should not have paid $3,100 tax on the $20,686 she earned during the 2016-17 financial year.
The judgement means she will be entitled to a refund of more than $2,200.
In his scathing judgement, he accused the ATO of targeting Ms Addy, a drama student, because she was British.
Four years after arriving Down Under, she has won a Federal Court battle with a judge condemning the Australian Taxation Office for discriminating against Poms
‘That is a disguised form of discrimination based on nationality,’ he said in his judgement, published on Wednesday.
Ms Addy, who originally hailed from Bexleyheath, in London’s south-east came to Australia in 2015.
The following year, she worked on a horse farm in Western Australia before working casually for the next year as a waitress at Sydney’s Menzies and Novotel hotels.
After being dissatisfied with the tax office assessment, she last year launched legal proceedings in the Federal Court.
Mr Chapman said plenty of H&R Block’s clients were working holidaymakers who had been unfairly taxed.
Ms Addy, who originally hailed from Bexleyheath, in London’s south-east came to Australia in 2015
‘We’ve had a steady procession of these people through our doors arguing that this tax rate is not fair,’ he said.
‘All those people, if this judgement stands, will have cause to go back to the ATO and say, “Thanks very much, you’ve got our tax wrong, we’ll have our extra refund please”.’
An ATO spokeswoman said the tax office had yet to decide whether it would appeal the Federal Court decision.
‘The ATO will consider this decision and whether an appeal is appropriate,’ she said.
She added the decision was unlikely to affect the vast majority of working holidaymakers, who don’t live in Australia.
In Ms Addy’s case, Justice Logan accepted that renting at a share house at Earlwood in Sydney’s inner-west meant she should not have paid $3,100 tax on the $20,686 she earned during the 2016-17 financial year. The judgement means she will be entitled to a refund of more than $2,200
‘We consider most working holiday makers are not residents for tax purposes and this decision has no impact for these working holiday makers,’ she said.
‘This decision only affects the tax rates applying to a minority of WHMs who are also residents, and only those from countries affected by a similar clause in the double tax agreement with their home country.’
Like Australian citizens, working holidaymakers who are residents for tax purposes don’t pay tax on the first $18,200 they earn but pay 19 cents in the dollar for amounts between $18,201 and $37,000.
On Census night in 2016, there were 129,442 working holidaymakers in Australia, of which 78,763 were residents with another 50,680 overseas visitors.
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