The Australian Taxation Office has appealed to the Full Federal Court against the decision in the matter of Addy v Commissioner of Taxation.
This decision relates to whether a working holiday maker was required to pay tax at the minimum 15 percent tax rate applying to working holiday maker income or at the rates that otherwise apply more generally to Australian residents (which incorporate the tax-free threshold).
It is important to note that the ATO will continue to administer the working holiday maker income tax rates in line with current practice until the appeals process is exhausted. Employer obligations have not changed and employers should apply the PAYG withholding tax rate in accordance with their employees Tax File Number declaration. If a worker identifies themselves as an Australian resident for tax purposes, and our records indicate they are a working holiday maker, we will notify both the employer and worker of their working holiday maker status and advise them to apply the relevant tax rate.
The impact of the decision and any appeal is limited to working holiday makers from Chile, Finland, Germany, Japan, Norway, Turkey and the United Kingdom; who also qualify as residents of Australia for tax purposes. Of the Working Holiday Maker visas issued in 2018 only about 36 percent were from those countries and most will not qualify as tax residents of Australia due to the itinerant and temporary nature of their time spent in Australia. (See: Are you an Australian resident for tax purposes if you come for a working holiday or visit?)
Working holiday makers who may potentially be entitled to a refund are encouraged to wait until the appeal has been decided before seeking a refund, amending their return or objecting. They should continue to check the ATO website for updates on the appeal decision. Working holiday makers will not be disadvantaged in such circumstances as they will be able to lodge an amendment request with the Commissioner at a later time. In the event that a taxpayer’s amendment period has expired, the Commissioner will give favourable consideration to any requests to extend the time for lodgement of an objection.
