On 24 June 2021 the High Court heard the taxpayer’s appeal in the Addy case and reserved its decision. This is the case about the validity of Australia’s ‘backpacker tax’ – under an ‘anti-discrimination’ clause in a Double Tax Agreement – in this one, our agreement with the UK.
See below for further details.
The taxpayer (Ms Addy) was a working holiday maker from the UK who was an Australian resident for tax purposes. The issue is whether a non-discrimination clause in the Australia-UK DTA applied so that she should be taxed at the standard rates applicable to Australian tax residents rather than at the special rates under the so-called “backpacker tax”. The main difference is that there is no tax-free threshold under the “backpacker tax” and the first $45,000 of taxable income ($37,000 for the particular income year in the Addy case) is taxed at 15%.
At first instance, the Federal Court ruled in favour of the taxpayer (see related TT article), but on appeal a majority of the Full Federal Court ruled in favour of the ATO – the “backpacker tax” applied (see related TT article). The Commissioner issued a statement as to how he’d deal with the taxpayer’s initial appeal, whilst he decided if he’d appeal (see related TT article).
[LTN 120, 25/6/21]