ATO launches appeal over backpacker tax ruling

The Federal Court ruled the backpacker tax was discriminatory.

The Australian Tax Office (ATO) has appealed against a federal court ruling that Australia's backpacker tax is discriminatory.

In October, the Federal Court ruled the Government's 15 per cent tax on working-holiday visa holders was invalid.

The tax on working holiday makers meant foreign travellers on 417 or 462 visas, who earned less than $18,200, were required to pay 15 per cent tax, unlike Australians who were not taxed on similar earnings.

British woman Catherine Addy, with Irish-based tax agency TaxBack.com, brought the legal action against the ATO.

The ruling, and any decision relating to the appeal, would affect backpackers from Chile, Finland, Germany, Japan, Norway, Turkey and the UK.

Almost 40 per cent of workers on the holiday-maker visas are from these countries.

Announcing its appeal in a statement today, the ATO said employers should continue to administer the 15 per cent tax.

"Employer obligations have not changed and employers should apply the PAYG withholding tax rate in accordance with their employees' Tax File Number declaration," it said.

"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".

The ATO previously told the ABC it expected, "around 5 per cent of working holiday makers are likely to be entitled to have their return amended" if the ATO's appeal was unsuccessful.

The appeal comes as many Australian farmers are employing backpackers to harvest summer crops.

Victorian Farmers' Federation vice-president Emma Germano said her industry would "wait with bated-breath" for the results of the appeal.

"I hope in earnest that if the appeal is won that we won't see the ATO have separate tax rates for different nationalities doing the same job," Ms Germano said.

"That was our complaint about the ill-fated backpacker tax from the outset.

"Growers are sick and tired of the convoluted system that we have to navigate, we look forward to some common sense prevailing"

No changes will be made to the tax until the appeals process has concluded.