Addy v Commissioner of Taxation, [2019] FCA 1768, reinstated by [2021] HCA 34 after being rev'd by [2020] FCAFC 135

The taxpayer, who was a British citizen aged 23 and had been residing at her family home in Bexleyheath, Kent, came to Australia on a “working visa” on 20 August 2015, and (following extension of her visa) returned to Kent on 1 May 2017 after having stayed most of her time with a friend in a house in Sydney (other than a two-month stint at a horse farm, as required in order to secure her visa extension).

In finding that the taxpayer was “resident” in Australia during this period, Logan J stated (at para. 54):

With respect to the ordinary meaning of the term, I observed in Stockton, at [23], that “both the nature, duration and quality of physical presence in a particular place as well as intention are relevant to determining whether and where an individual is a ‘resident’”. In relation to Ms Addy and in respect of the 2017 income year, she was settled in Sydney at the Earlwood house. It was from there that she ventured to follow her chosen employment. It was her home base for employment, living and social purposes. All of this occurred as a matter of habit and intent. There was nothing itinerant about her life.

The taxpayer, who was a British citizen aged 23 and had been residing at her family home in Bexleyheath, Kent, came to Australia on a “working visa” on 20 August 2015, and returned on 1 May 2017. She was found by Logan J to be resident in Australia during this period.

A citizen and resident of Australia would have largely escaped income taxation on her modest income as a waiter due to the right to deduct a “tax-free threshold.” However, the “backpacker tax” provisions of the Australian Rates Act provided that a “working holiday worker” (defined to include the holder of a working visa), was subject to 15% tax on her income.

“Nationals” of the UK were defined in Art. 3(1) of the Australia-U.K. Treaty to Include British citizens and companies deriving their status from domestic law, and similarly for Australian nationals, so that the taxpayer was the former and not the latter. Logan J found that the imposition of the 15% tax on the taxpayer’s earnings in Australia as a waiter contravened Art. 25(1) of the Treaty, which provided:

Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected.

Logan J observed (at para. 89):

There is just no doubt that an Australian national cannot hold a working holiday visa issued under the Migration Act … . Under that Act, visas may only be issued to non-citizens … .

In finding for the taxpayer, he stated (at paras. 103-104):

[T]he discrimination between resident derived income from the same source in Australia is based on nationality. It is disguised by the reference to “working holiday maker” but the definition of that term makes it plain that what the disguise covers is nationality. A resident “national” of Australia undertaking the same work as did Ms Addy … would have the benefit of the tax free threshold.

… Materially, so far as the applicable rate of tax is concerned, the Rates Act distinguishes between individuals on the basis of the type of visa which that individual holds. Only non-citizens can hold the types of visa that constitute a “working holiday visa” (as defined), of which those successively held by Ms Addy were one type. That is a disguised form of discrimination based on nationality. That is exactly the type of discrimination which is prohibited by Art 25(1) … . It is but a more particular variant of the disguised discrimination example given in the OECD commentaries, at 332, [1], of different treatment of individuals based on whether or not they hold, or are entitled to, a passport issued by the State.