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Backpacker tax not discriminatory, Full Federal Court finds


The backpacker tax will continue to operate as intended as the Full Federal Court rules in favour of the ATO.

By Jotham Lian 12 minute read

The Full Federal Court has allowed an appeal by the Commissioner of Taxation over a 2019 Federal Court decision, ruling that the minimum 15 per cent tax for working holiday makers did not contravene a non-discrimination clause in a double taxation treaty between the UK and Australia.

The test case centred around Catherine Addy, a British citizen who travelled to Australia on a working holiday visa in 2015 where she lived out of a Sydney house and worked as a waitress at a couple of hotels, before returning to the United Kingdom in early 2017.

Ms Addy was subsequently assessed by the ATO to pay the minimum tax, colloquially known as the backpacker tax, of 15 per cent on income up to $37,000 as she held a working holiday visa.


She lodged an appeal, arguing that she was a resident in Australia during the relevant period and that the double taxation treaty applied in her circumstances.

The Full Federal Court said that while Ms Addy was a resident under the 183-day test, the Tax Commissioner was correct to assess the taxpayer in accordance with the rates of tax set out for working holiday makers.

“Although that imposed a greater tax burden on her than is imposed upon Australian residents who have the benefit of the tax-free threshold, it did not trigger the operation of Article 25 of the double taxation agreement,” Justice Derrington said.

“Article 25 is offended where the discrimination against the foreign national occurs solely by reason of having a different nationality.

“The imposition of a tax at a higher rate on the holders of specific visas did not discriminate against the holder solely on the basis of nationality and did not offend the agreement.”

ATO deputy commissioner Jeremy Geale welcomed the decision, noting that the working holiday maker income tax rates would continue to apply.

“This decision upholds the ATO’s current view, meaning that employer obligations have not changed, and employers should continue to apply the appropriate tax tables when determining the amount to withhold for working holiday makers,” Mr Geale said.

Ms Addy will have until 3 September 2020 to seek special leave to appeal the Full Federal Court’s decision to the High Court.

Jotham Lian

Jotham Lian


Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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