Catherine Addy: English waitress wins High Court case against backpacker tax

Thousands of backpackers could be eligible for an unexpected cash bonus after the High Court ruled on an ‘unfair’ tax.

An English waitress who took the Australian Taxation Office to court could have started the first of many legal battles as the tax office digs in over the so-called backpacker tax.

The High Court ruled Catherine Addy had been discriminated against because of her British nationality when she was made to pay a higher tax rate than Australian residents.

Speaking with the ABC, Ms Addy said the thousands of dollars owed to her would make a “huge difference in her life”.

Under controversial rules introduced in 2017, working holidaymakers on 417 visas must pay a 15 per cent levy on income up to $37,000.

In a unanimous decision, the court ruled in Ms Addy’s favour, finding the levy contravened a tax treaty with the United Kingdom.

The ruling could result in thousands of foreign workers from nations with similar tax treaties receiving refunds from the tax office.

Thousands of foreign nationals subject to the backpacker tax could be entitled to a refund. Picture: Zoe Phillips

It allows foreign nationals with 417 visas to be regarded under the law as residents of Australia for tax purposes, avoiding double taxation.

Ms Addy and TaxBack chief executive Joanne Murphy encouraged other backpackers to check whether they were also taxed incorrectly.

TaxBack funded Ms Addy appeal and have put the tax office on notice, suggesting it would consider sponsoring the cases of other backpackers.

But the tax office on Wednesday did not immediately respond to the ruling and indicated to employers they should not change tax withholding rates for backpackers.

“The ATO is currently considering this decision and will provide further guidance as soon as possible,” the tax office said.

Catherine Addy, the woman who took the ATO all the way to the High Court. Supplied

“This decision is only relevant where the working holidaymaker is both an Australian resident for tax purposes and from Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany or Israel.

“Working holidaymakers who may potentially be affected by this decision are encouraged to check the ATO website for updated guidance prior to lodging or amending a return or lodging an objection.”

Ms Addy worked as a waitress in two Sydney hotels for five months in 2017 and earned $26,576.

Her legal team successfully argued that her British citizenship meant she was taxed in a more “burdensome” way than locals, which is prohibited by the tax agreement with Britain.

After a successful challenge of the tax in the Federal Court in 2019, the tax office appealed the ruling.

The full bench of the Federal Court upheld the appeal in August 2020, determining the backpacker tax was not discriminatory.

Ms Addy worked in two hotels over a five-month period.

Ms Addy subsequently appealed to the High Court, who overturned the tax office’s appeal. In a unanimous decision, the court reinstated the original 2019 Federal Court ruling.

“The question is whether that more burdensome taxation was imposed on Ms Addy owing to her nationality. The short answer is ‘yes’,” the High Court ruled.

“When the position of Ms Addy is compared with that of an Australian national, as it must be, that is the only conclusion which may be drawn.”

The decision could cause embarrassment for Scott Morrison, who introduced the tax during his tenure as treasurer.