British working holiday visa holders in Australia have been forced to pay a flat rate tax higher than Australian residents without the tax-free threshold. The tax has been overturned as an English backpacker took Australia to court and won the favour of our High Court.
The high court made the decision because the international double tax agreement between Australia, Britain and other countries prevent discrimination by nationality. The ‘backpacker tax’ clearly charged a different rate based on nationality.
A precedent has been set for thousands of foreign workers to have their taxes reviewed and the difference potentially refunded.
The ATO has however said that, “This decision will not change the tax rates for the majority of working holidaymakers,” because most working holiday visa holders will be non-residents for tax purposes as the purpose of the visa is to be able to work to support your holiday. In other words, they are still a resident for tax purposes in their home country.