Backpacker tax ruling ‘not legal’
The Australian Taxation Office is appealing a Federal Court ruling that the backpacker tax is not legal.
The controversial tax, introduced in 2016, means people on a working holiday visa are slugged 15 per cent tax from the first dollar earned, while Australians are not taxed on income up to a threshold of $18,200.
But in late October the Federal Court ruled the tax could not be levied on some travellers because of anti-discrimination clauses in tax treaties Australia had with other countries.
If the ruling is upheld, the tax will no longer apply to nationals/citizens from treaty members, including Chile, Finland, Germany, Japan, Norway, Turkey and the UK, who also qualify as residents of Australia for tax purposes.
About 36 per cent of working holidaymaker visas issued last year were from countries affected by the ruling. In a statement issued on Tuesday, the ATO said it would continue to administer the working holidaymaker income tax rates in line with current practice until the appeals process was exhausted.
“Employer obligations have not changed and employers should apply the PAYG withholding tax rate in accordance with their employees’ tax file number declaration,” the statement said.
If the ruling is upheld, tens of thousands of backpackers could be repaid hundred of millions of dollars. The ATO said holidaymakers who may be entitled to a refund should wait until the appeal had been decided before seeking a refund, amending their return or objecting.
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