Labour shortage issues could become worse after Federal Court decision on backpacker tax

By Rodney Woods

The challenges keep on coming for the region's horticulture growers after the Federal Court ruled the backpacker tax legal.

The Australian Taxation Office won its appeal in the Federal Court on August 6, in a case that involved British backpacker Catherine Addy, who was in Australia on a working holiday visa in 2015 until 2017.

Last October, the Federal Court ruled the controversial 15 per cent levy breached tax treaty clauses with the United Kingdom.

Under the tax, working holidaymakers must pay 15 per cent tax on earnings under $18,200 — Australians don't pay tax on similar earnings.

In the October ruling, the court found the tax was a "disguised form of discrimination based on nationality".

But this time around, Justice Simon Steward said the backpacker was not treated differently for tax reasons because of her nationality.

“Her income was of this kind because she chose to apply for and then hold a working holiday visa,” he said in his ruling.

“Her nationality did not compel her to apply for this class of visa in order to enter Australia.”

Justice Roger Derrington said she should not have been considered a resident for tax purposes.

“Her circumstances did not reflect the attributes of a person who lived here, either permanently or for a considerable time, and nor do they support a conclusion that she had a settled or usual abode here.

“She was on an extended holiday albeit one which involved engaging in employment in order to fund its continuance.”

Justice Jennifer Davies agreed Ms Addy shouldn't have been considered a resident for tax purposes, but she considers the backpacker tax discriminatory.

In response to the decision, Fruit Growers Victoria grower services manager Michael Crisera said he hoped the 15 per cent tax rate would not discourage working holiday visa holders from working in Victoria.

“As an industry we’ve got to try and keep working holidaymakers in the country and obviously the current tax rate is not going to help that,” he said.

“I think with the pandemic we won't see backpackers coming in, so we want to reduce the number of those leaving.”

Mr Crisera said the coronavirus pandemic would have bigger impacts in the short term.

“I don't think it (the ruling) will have an impact in the short term,” he said.

“If they had of ruled the other way, there may have been an impact in the long term but the pandemic is a larger challenge than this at the moment.”

Cobram and District Fruit Growers Association president Tony Siciliano said he believed everyone should be taxed the same rate.

“Personally, it doesn't matter who works for me or anyone else, no-one should be treated differently,” he said.

Mr Siciliano said if borders remained shut, many growers would rely on locals to fill the labour shortage.

“We are going to struggle this year unless city folk come to work.

“In a normal year, 85 per cent of workers on-farm have a visa.”