Taxback.com is challenging the backpacker tax in Australia, claiming that it unfairly targets foreign workers.
Irish fintech firm Taxback.com has taken legal action against the government in Australia to challenge the tax regime for working tourists and backpackers, which it deemed to be “punitive”.
The 15pc tax rate on earnings up to A$37,000 earned by working tourists was introduced in January 2017, and Taxback.com has said that the tax contravenes non-discrimination clauses built into tax treaties between Australia and the UK, US, Germany, Finland, Japan, Chile, Turkey and Norway.
Approximately 50pc of all visitors who come to Australia on 417 or 462 visas are from the eight countries Taxback.com noted in its legal filings. The visas are typically used by backpackers who embark on a working holiday in the country.
Recognising the contribution of backpackers
Commercial director of Taxback.com, Eileen Devereux, said the action was important to protect both foreign workers who are often paid less, and Australia’s reputation as a popular destination for working holidays. “Many backpackers become de facto ambassadors for Australia and Australian culture. Not only does the backpacker tax impose higher taxes on these ambassadors based on their nationality, it also hurts some of the poorest taxpayers in the country.
“Collectively, backpackers contribute more than A$3.5bn to the Australian economy every year. By treating backpackers unfairly, Australia will lose out as it will miss out on these working holidaymakers, and damage its positive image abroad.
“The tax is also counterproductive as it hurts Australian companies that need to fill their job vacancies with these workers.”
Australia is willing to talk
Devereux added that she was pleased with the willingness of the Australian government to come to the table for talks, as it is the preference of Taxback.com to resolve the problem “through a mediated solution”.
The legal action is not currently inclusive of Irish backpackers, as the challenge is with respect to the aforementioned eight countries that have double taxation agreements with Australia, including the non-discrimination clause (which Ireland doesn’t have).
Devereux told The Irish Times that if the case was successful, the ruling could be extended to other countries whose citizens avail of 417 and 462 visa programmes, including Ireland.
Sydney Harbour Bridge, Australia. Image: dinozzaver/Shutterstock