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Important Truths about the Backpacker Tax in Australia

Many countries in the world are governed democratically. Democracie are governed by one man one vote rule. These leaders are people’s representatives hence they speak and act on behalf of the people. The elected leader hence manage the national and local level governments on behalf of the populous. The government relies on the taxes of its citizen to be able to operate. In turn, the government provides public utilities such as the road infrastructure, public schools and public health facilities to mention but a few. This is a short history of the reason why governments collect taxes.

It may come as a surprise to some people but foreigners are also charged taxes in the alien countries that they visit. This is because they earn the income that they are taxed on, in the respective country where the tax is imposed. In addition, they utilize the same public facilities that the citizens of the said countries use. For this reason, in 2017, the Australian government resolved to introduce the levy termed the backpackers tax. The backpacker tax was a tax that was charged on foreigners who were in Australia on a visiting visa known as 457 Visa. In essence, if these visitors took up any jobs during their stay in Australia, they were to file returns and pay taxes to the Australian government.

Like any other individual tax charged across the globe, the backpacker tax was charged at a graduated scale rate. The visitors where charged a fifteen percent tax from the first dollar they earned and up to thirty seven thousand dollars. The next bracket of the backpackers tax is above the thirty seven thousand dollar. This tax is seen to exploit foreigners because they are charged taxes right from the first dollar while the locals are charged at amounts above eighteen thousand and two hundred dollars. Further the next tax bracket charged locals approximately ten percent for earnings between eighteen thousand two hundred dollars to thirty seven thousand dollars. Recently, an Australian Federal Court ruled that this was an illegal levy against the foreign holiday workers.

The court observed that the foreigners who are being taxed under the backpacker tax levy hail from countries which have treaties with Australia not to practice such unfair tax regimes on respective nation’s citizens. In the ruling the court also sited discrimination against the foreign workers. The Australian tax man is considering appealing against this decision since they had targeted to collect over half a billion Australian dollars from the backpacker tax.

As a result of this tax regime, there has been a decline on travelers who entered Australia for vocational work. Following this ruling, foreigners who had been charged the backpacker tax are considering compelling the Australian tax man to give them a refund on the past deductions.

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