The controversial 'backpacker tax' has been struck down by the Federal Court, which could force the government to collectively repay some travellers hundreds of millions of dollars.
The Federal Court has ruled a controversial tax on working holiday visa holders to be illegal - paving the way for tens of thousands of backpackers to be potentially repaid hundreds of millions of dollars.
The court ruled on Wednesday the “backpacker tax” could not be levied on some travellers due to anti-discrimination clauses in tax treaties Australia has with other countries.
Justice John Logan said the tariff was in breach of tax agreements with Britain, the United States, Germany, Norway, Chile, Japan, Finland and Turkey.
The treaties require Australia to tax nationals from those countries in the same way as local workers.
Justice Logan described the backpacker levy as "a disguised form of discrimination based on nationality" as he handed down the judgment.
The tax requires any foreigner on 417 or 462 category visas earning under $18,200 to pay 15 per cent tax, unlike Australians who are not taxed on similar earnings.
It is thought around 70,000 backpackers could now collectively get hundreds of millions of dollars back from the Australian Tax Office (ATO).
The ATO said it is considering an appeal.
The court case came about after a British tax company filed a complaint on behalf of Catherine Addy, a Briton who spent a two-year stint in Australia working in the hospitality industry.
The “backpacker tax” was introduced in 2016, a year before Ms Addy returned to Britain.
Justice Logan ruled the federal government discriminated against Ms Addy by charging her the levy, as it was in breach of Australia’s tax treaty with Britain.
Ms Addy mainly lived in a Sydney sharehouse and stayed, for the most part, in New South Wales - meaning she was considered a "resident" for tax purposes.
Holiday makers who travel from place to place can be classed as "foreign residents" for tax purposes, the ATO website states.
Roughly 150,000 foreign nationals travel to Australia every year on working holiday visas.