Taxback. com, an Irish tax accounting firm, has taken legal action against the Australian federal government to challenge what it deems to be a "punitive" tax regime for working tourists. However, the legal action, which argues that the tax breaches Australia's international tax treaties, is not yet applicable to Irish visitors to the country.
In January of this year, Australia introduced a 15 per cent tax rate, down from a proposed 32 per cent originally, on earnings up to 37,000 Australian dollars for working tourists. Prior to that, backpackers could earn up to AUS$18,200 tax free, and Taxback.com says that the change in tax treatment has major implications, hitting working tourists “hard financially” .
Now Taxback.com has initiated a legal challenge on behalf of working holidaymakers from eight countries, arguing that the backpacker tax contravenes non-discrimination clauses built into tax treaties that Australia has signed with eight countries: the UK, the US, Germany, Finland, Chile, Japan, Norway and Turkey.
Eileen Devereux, commercial director with Taxback.com, said the action was an important step to protect foreign workers and Australia's reputation as a working holiday destination.
Fatally flawed
“By discriminating against foreign workers the tax is fatally flawed,” she said.
However, Irish backpackers are not yet included in the action.
“Our challenge is with respect to eight other nationalities who have double taxation agreements, which include non-discrimination clause, which Ireland does not have, however we would be hopeful that if the case were successful for the eight countries in question that the Australian government would extend this to the additional nationalities who avail of the 417 and 462 visa programs.”
In the year to June 30th, 2016, almost 7,000 Irish nationals received a 417 visa for Australia. This is down significantly on the near-26,000 that received visas in 2011/2012.
Separate to the action, Taxback.com has also agreed to enter into dialogue with the Australian government in an effort to resolve the issue outside court, and thus far, has been “extremely encouraged” by the willingness of the Australian government to come to the table for talks.
“It is our preference to resolve this issue through a mediated solution and we look forward to collaborating on this,” Ms Devereux said.
