We have previously discussed Addy v FCT [2021] HCA 34 here. In this case, the High Court unanimously allowed Ms Addy’s appeal and found that a UK working holiday visa holder, who was a tax resident of Australia, was entitled to the tax-free threshold and taxation at the rate that applied to Australian resident nationals. The ‘backpacker tax’ was discriminatory under the non-discrimination Article 25 in the Australia and United Kingdom Double Tax Agreement (UK DTA).

The Australian Taxation Office (ATO) has issued a decision impact statement on the Addy case. The ATO considers the decision only applies to a working holiday visa holder that is both an Australian tax resident and a national of one of the following countries:

• Chile

• Finland

• Germany (from 1 July 2017)

• Israel (from 1 July 2020)

• Japan

• Norway

• Turkey, and

• the UK

The ATO considers most holders of working holiday visas will not be residents of Australia. That is because persons who come to Australia for the purposes of a holiday, even if they work while here, generally do not become residents of Australia.

The Addy decision may be applicable where an individual holds a working holiday visa and then stays in Australia under a different visa. Such individuals would be required to include in their assessable income any foreign income that an Australian resident national in the same circumstances would include.

The ATO has published guidance on how the Commissioner proposes to deal with such cases.

To discuss or for more information:

Neil Brydges
Principal Lawyer | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E nbrydges@sladen.com.au

Lucy Liang
Lawyer
T +61 9611 0131
E lliang@sladen.com.au