UK tourist tax upheld as landmark ruling reveals why Australia can’t follow suit – realestate.com.au

A controversial “tourist tax” will hit visitors to British towns and cities, with regional mayors given the power to levy an estimated $4 a night on overnight stays.

The move, confirmed ahead of the UK budget, has sparked fierce debate over higher holiday costs and its potential to deter travellers.

But while Britain grapples with this controversial charge, Australia’s own legal history means that a similar, discriminatory tax would face an insurmountable challenge Down Under, fundamentally changing the conversation about our tourism and real estate sectors.

The UK proposal, which applies to both domestic and international visitors, could add a significant amount to holiday bills, with a family of four having to pay an extra $114 (£56) for a week’s stay.

Supporters argue the proceeds will fund local reinvestment, while critics warn of a “shock reversal” that could cost the public hundreds of millions and damage Britain’s appeal.

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According to The sunLondon mayor Sadiq Khan, Liverpool player Steve Rotherham and Manchester player Andy Burnham have all backed the tourism levy.

But Tory mayor of Teesside Ben Houchen vowed to protect visitors in his north-east region and dismissed the idea.

“This is yet another cash grab that will undermine the fantastic hospitality businesses we have in Teesside, Darlington and Hartlepool,” he told The Sun.

Australian tourists could be forced to pay an additional $4 a night and regional mayors will be given the power to impose the levy on overnight stays in hotels, holiday lets and B&Bs.

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Hospitality bosses also warn this could cost tourists half a billion pounds more in taxes and make Britain unattractive to visitors.

Although local tourist taxes are intended to provide vital funds for local development and a more sustainable visitor economy, there can be significant commercial drawbacks regarding their potential to deter tourists, increase operating costs for businesses and hinder the recovery and competitiveness of the hospitality and tourism sectors.

“This is a shocking turnaround that will only make life more expensive for working people,” Kate Nicholls of UK Hospitality told The Sun.

“It could cost the public up to £518 million in extra tax when traveling in Britain, which would have a knock-on effect on the wider hospitality sector.”

The ‘Backpacker Tax’ bomb: a precedent that protects

However, any attempt to copy such a plan in Australia would run up against a landmark Federal Court ruling, which effectively bans taxes that discriminate based on nationality.

The infamous ‘backpacker tax’ case, which imposed a higher tax rate on working holidaymakers than on Australian residents, was deemed a ‘disguised form of discrimination’.

In 2019, the court ruled it had breached non-discrimination clauses in Australia’s double tax treaties, including one with Britain, which mandate equal tax treatment for citizens of both countries.

This precedent means that any new Australian tourism tax that distinguishes between local and international visitors, or between nationalities, will almost certainly be abolished.

While the tax already exists in other countries, it would be more difficult to implement in Australia.

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The ‘backpacker tax’ ruling has not only created a clear legal barrier, but has also highlighted the significant reputational damage that such discriminatory policies can cause.

Australia’s image as a welcoming destination had been tarnished, a risk that any new, similar tax would undoubtedly entail.

Consequently, Australia currently lacks a national tourism tax.

Although Victoria has introduced a ‘Short Stay Levy’ on short-term accommodation, this is crucial for all visitors, including residents, avoiding discriminatory pitfalls.

A tourist tax is already applied in New York, Paris and Milan, among others.