ATO Decision Impact Statement on Addys backpacker tax case |
Posted: May 30, 2023 |
Following to the Court’s decision on Addy v Commissioner of Taxation on the backpacker tax case, the Australian Taxation Office (ATO) issued a Decision Impact Statement on 17 December 2021. In the statement, the ATO has outlined the background of Addy’s case, the issues decided by the Court and the ATO’s view on the decision. Subsequently, the ATO has published the implication of the decision for working holiday makers (WHM) and guided how to lodge a tax return or amend the tax return on their website. Background of Addy’s case
Issues decided by the CourtThere are two main issues decided by the Court on Addy’s case, which are her Australian residency status and whether Non-Discrimination Article (NDA) has been contravened. The issues decided by the Court are predominantly unfavourable towards the Commissioner. ResidencyThe Full Federal Court ruled that the taxpayer was a resident under the 183-day test but found that the taxpayer was not a resident under the ordinary resides test as her stay had a ‘fluid nature’ which is closer to being on an extended holiday. The court further commented that this was consistent with Addy’s declaration when obtaining the visa and there was nothing suggested that her intention had changed. The Full Federal Court also concluded further that Addy’s residency ceased once she departed Australia in May 2017. As a result, she was only entitled to a part of the tax-free threshold under the ITRA 1986. Application of Non-Discrimination Article (NDA)The High Court ruled that NDA has been contravened and the effect of the NDA being contravened for this taxpayer was that the taxpayer should pay tax at the rates applying to resident nationals as set out in Part I of Schedule 7 to the ITRA 1986. The implication of this case toward backpacker taxation going forwardThe ATO has identified this case will have implications for the WHM who satisfied all the following criteria:
If the WHM satisfies the above criteria, the WHM will have the option of whether to lodge an income tax return on the same basis as an Australian resident return. There are other implications required to be considered by the WHM if he/she chose to be assessed on the same basis as a resident Australian national’s tax return, such as:
If the WHM is from an NDA country that is not an Australian resident, or a WHM from a non-NDA country, then the WHM will be taxed at the usual WHM rate. SummaryAddy’s case will not be applicable for most WHMs as most of them are either non-residents or from NDA countries. However, if the WHM is from an NDA country and treated as an Australian resident, the taxpayer will have the option to be taxed the same as an Australian national under the NDA. In order to be taxed at the Australian resident rate in the current or future period, the WHM will have to lodge a tax return to the ATO. The ATO allows the amendment of the prior year’s tax returns for the affected WHM. Given the complicated nature of the amendment, it is recommended for the WHM to seek professional assistance from the tax professional for the lodgement/amendment of the tax return. Article : https://au.andersen.com/ato-decision-backpacker-tax-case/ To find out more, please visit our website or email us at: [email protected]
|
||||||||||||||||||||||||||||||||||||||||||
|