‘Why I am challenging the unfair Australian Backpacker Tax’

Catherine Addy believes that the controversial Backpacker Tax could deter Working Holidaymakers from visiting Australia in the future 

“I knew absolutely nothing about it”, says Catherine Addy with a laugh when asked what she knew about Australian tax as she boarded her flight to Sydney in 2015.

The British national travelled down under on a Working Holiday Visa and was employed in a number of roles before she returned to the UK in 2017.

Fast-forward six years, Addy is now at the centre of a legal challenge against the Backpacker Tax.

Originally introduced in January 2017, the Backpacker Tax deducts 15% of every dollar a working holidaymaker earns in the country.

Before the tax was implemented, backpackers were entitled to earn up to $18,200 tax-free. However, unlike Australian citizens, backpackers are now ineligible for the tax-free threshold. 

Australia has signed tax treaties with the UK, Chile, Finland, Germany, Japan, Norway, and Turkey, which stipulates that working holidaymakers can qualify as ‘residents’ of Australia for tax purposes.

And each treaty specifies that their citizens should not be taxed "in a more burdensome way" than Australian nationals.

Case study

Addy worked as a waitress in two Sydney hotels between January 2017 and May 2017 and this period is being used as a case study in the legal challenge.

During this period, she earned $26,576 and was due to pay $3,986 in tax. 

An Australian resident would only have paid $1,591 in tax on the same income.

“I really think that challenging the tax has been the right thing to do,” says Addy.

“I believe that this tax is inherently unfair. And if we can get the tax overturned, it will make a really big difference for thousands of backpackers who travel to Australia in future." 

“I have enjoyed being a part of this legal case because I know I am standing up for what is right.”

Addy, 29, says she first heard of the Backpacker Tax when she attempted to claim her tax refund at the end of 2017. 

“When I first moved to Australia, the Backpacker Tax did not exist. I applied for my tax refund for Australia with Taxback at the end of the year and I got $1,000 back. I was so happy! I didn’t even realise that it’s a really normal thing for people to get their tax back."

“I was hoping I would be due a refund for the second year as well. But, after the Backpacker Tax was brought in, it turned out that I owed about $2,500 to the ATO! I was in shock. I couldn’t believe it." 

After she was hit with a tax bill - and with the backing of Taxback - she decided to take the matter to court.

Catherine Addy visited Sydney as a backpacker.

The Backpacker contribution to Australia’s economy

Should the Backpacker Tax be overturned, it could have wide-ranging ramifications for the 80,000 working holidaymakers living in Australia.

However, Addy believes that backpackers could be put off visiting Australia in future if the tax continues to be implemented.

“I think this unfair tax will cause a ripple effect and have a real impact on the number of people that choose Australia for their Working Holiday. And I think that is a real shame – not only for the travellers who have an opportunity to gain life experience in such an amazing country, but also for the many businesses that rely on backpackers.”

The Working Holiday Visa Program makes a massive contribution to Australia’s economy every year. 

In fact, backpackers create over 25,000 jobs in the Australian economy and spend approximately $10,000 in Australia – this represents two and a half times more than they earn. 

Much of this spending occurs in regional areas of Australia – particularly by those Working Holiday Makers that have ambitions of securing a second year visa.

In order to be eligible to apply for a second year, backpackers must complete three months of specified work in regional Australia during their first 12 months in Australia.

‘Specified work’ is typically includes roles in the Agriculture, Construction, Forestry and Tree Felling, Fishing and Pearling, and Mining industries.

“I found work cleaning up after horses at a stable in Western Australia,” says Addy.

“I put my blood and sweat into that job. It was really hard work and very long days. It was not uncommon to have to get up at 2am to start work."

“Sometimes I wouldn’t finish until 11pm! At one point, I had worked for five weeks straight without having a break or day off."

“Farmers in Australia rely heavily on backpackers for seasonal work. And it is not easy work to do – it can be a real slog, believe me! So I don’t think it’s fair that so much tax is taken away from the wages of the backpackers doing this work."

Memories

Addy is now attending Drama school and living in Guildford, just outside London.

She looks back on her time in Australia fondly and brought great memories with her when she returned to the UK in 2017.

“Yeah I went exploring with my friends! We travelled from Sydney all the way up the coast to Cairns. We spent some time in Brisbane which was great. But my highlight was surfing in Byron Bay. That was absolutely amazing."

“Overall, I spent most of my working holiday in Sydney. There is so much to see and do there. I really enjoyed the balance between big city life and relaxing on the beaches.”

If you previously worked in Oz and would like to claim your tax back in Australia, Taxback can help you out. Feel free to use our no obligation tax refund calculator to find out how much tax you can claim back!