There have been a substantial number of Tribunal cases concerning the Australian Tax Residency of individual taxpayers in recent years. Most of the cases involve Australian citizens or residents working abroad.
It could be argued the law and principles in this area were considered well established and that it is only the individual facts and circumstances of each case that determined the outcome. However, recent decisions may well have moved the goals posts! We suggest this applies to the most recent case, Re The Engineering Manager and FCT, where the taxpayer successfully argued that he was a non-resident for Australian tax purposes in the relevant period.
The taxpayer was working as a lead instrumentation engineer and manager in Oman for a multinational company in the oil and gas industry from January 2010 to April 2011, when he returned to live with his family in Perth. He had been working overseas on different engineering jobs since 2004.
During his time in Oman, the taxpayer made regular trips to Perth to visit his family. In the 2011 income year, he spent a total of 240 days in Oman and 62 days in Australia.
He held a bank account in Oman and regularly transferred money into an Australian bank account held jointly with his wife. In his outgoing and incoming immigration passenger cards, the taxpayer had indicated that he was an Australian resident departing temporarily or an Australian resident returning to Australia.
The Commissioner argued that he was a resident of Australia for the whole of the year ended 30 June 2011 due to the connection between him and his family living in Australia, and his pattern of consistently coming to Australia when on leave from his overseas employment. This is ordinarily a strong factor.
However, a distinguishing fact in this case is that the taxpayer stated that part of his decision to work overseas in 2004 was “marital issues” that he started having around about that time which the Tribunal considered to be a very significant factor.
Australian Tax Residency – The Decision
The Tribunal found that the taxpayer was not a resident of Australia under the ordinary concepts test for the 2011 income year. It was the taxpayer’s intention to continue to work and live in Oman, dependent on the renewal of his employment contract. His priority was his work, and his career. He ordered his lifestyle around his work commitments. In the circumstances, the Tribunal concluded that his work ties outweighed his family ties, even though he financially supported his family by sending the bulk of his income to the joint bank account held with his spouse in Australia.
The Tribunal also found that the taxpayer’s permanent place of abode for most of the year ended 30 June 2011 was outside Australia. This is because he established his fixed and habitual place of abode in Oman, close to his work even though he intended to return to Australia in the future.
Our thoughts …
Although the case turns on its own facts, and we would be wary of placing too much weight on the outcome without considering in detail each individual Client’s own circumstances, some lessons can be learned from the case that actually vary to some extent from previous understandings –
First, the ordinary meaning of the word “resides” requires the issue to be determined on the totality of the taxpayer’s factual circumstances, and not those of his family unit. Equally it could be argued the correct meaning of the word is more concise than the interpretation of the Commissioner in recent times.
Second, to establish a “permanent” place of abode outside Australia, it is enough that a taxpayer intended to live overseas indefinitely, but not necessarily forever.
Third, the issue of residency for tax purposes must be determined annually in respect of each income year.
Finally, the information completed by persons on passenger immigration cards is NOT regarded to be important to the issue of residency status for income tax purposes as the person may not have turned his mind nor sought any legal advice to the specific tax issues when completing the forms.