Wednesday 21 November 2018

Irish tax company takes legal action over backpacker tax in Australia

The Sydney Opera House
The Sydney Opera House
Ellie Donnelly

Ellie Donnelly

Kilkenny-based, which provides global tax refund and tax return services, has taken legal action against the validity of the Australian Federal Government’s backpacker tax.

The action is being taken on behalf of working holidaymakers from eight countries, including the United Kingdom and the United States.

Irish backpackers are affected by the Australia Government’s action, which Taxback says runs in direct conflict with Australia’s obligations under multiple international tax agreements, however they are not specifically included in the Taxback action.

The company is arguing that the backpacker tax introduced at the start of this year 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.

These clauses prohibit unequal tax treatment of citizens from these countries, including working holidaymakers, compared with Australians.

International tax treaties signed by Australia override domestic tax laws.

"Our challenge is with respect to eight other nationalities who have double taxation agreements, which include non-discrimination clause, which Ireland does not have," Eileen Devereux, commercial director at, said.

"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."

Separate to the action, has also agreed to enter into dialogue with the Australian Government following constructive correspondence with the Australian Government Solicitor in an effort to resolve the issue outside court.

"Having lodged our pre-action letter, we have 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.

The controversial tax was brought in under the Income Tax Rates Amendment (Working Holiday Maker) Reform Act 2016.

The law, as it currently stands, imposes a higher rate of tax on foreigners who enter Australia and earn income on a 417 or 462 Working Holiday Visa – the visas typically used by backpackers on a working holiday.

However Australia has tax treaties in place with its major trading partners, and almost all contain a non-discrimination clause that forbids unequal tax treatment of the citizens of these countries.

The legal action has been filed in the Queensland Federal Court and seeks ‘declaratory relief’ from the backpacker tax for citizens of the eight affected countries – in effect, rendering them exempt from the tax.

Visitors from the eight countries in question account for approximately 50pc of all visitors who come to Australia on 417 or 462 working holiday visas.

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