A British woman has won a major legal battle over Australia's controversial "backpacker tax", with the High Court finding it in breach of tax treaty clauses with the United Kingdom.
Catherine Addy claimed she'd been discriminated against because of her nationality when she was made to pay tax at a different rate to Australian residents between 2015 and 2017 when she was working in Sydney's hospitality industry.
Under the "backpacker tax", introduced in 2017, 417 visa holders are required to pay a 15 per cent tax to the first $37,000 of their income.
Ms Addy earned $26,576 during her time in Australia.
The tax burden for Australians from the same source was less, with an Australian national entitled to a tax-free threshold for the first $18,200 and then taxed at 19 per cent up to $37,000.
On Wednesday, the High Court found "there was no dispute" Ms Addy was an Australian resident for tax purposes during 2017.
As such, the levy imposed on her that year was in violation of a tax agreement with the UK that ensures nationals shall not be subjected to "other or more burdensome" taxation imposed on Australians "in the same circumstances, in particular with respect to residence".
"An Australian national deriving taxable income from the same source during the same period would have been taxed at a lower rate," the court said in its judgment.
"The more burdensome taxation was imposed on Ms Addy owing to her nationality and, for that reason, contravened ... the United Kingdom convention."
It's thought the ruling could have consequences for other backpackers who had higher taxes levied against them under the scheme.
Ms Addy had earlier appealed a 2020 Federal Court ruling that sided with the Australian Taxation Office and upheld the validity of the tax.
Similar tax treaties exist between Australia and countries such as the United States, Germany, Japan, Norway and Turkey.
