Key Takeaways

• The AAT confirmed that a taxpayer was still a “resident of Australia” even if they only spent two months per year in the country.
• The taxpayer was found to have continued to intend to return to Australia and to believe that Australia was still their home.
• The taxpayer provided insufficient submissions and evidence to demonstrate that their place of residence was outside Australia.

 

Home is not where the taxpayer is. Quy V. Commissioner of Taxation

In the recent case of Quy v Commissioner of Taxation [2024] AATA 245, the Administrative Appeals Tribunal (AAT) determined that a taxpayer was still an Australian resident for tax purposes despite physically being in Australia for less than two months per year.

After evaluating the taxpayer’s links to Australia, the AAT determined that the taxpayer fulfilled the “Ordinary Concepts” and “Domicile” requirements for Australian tax residence.

This case illustrates the significant complexities that individuals may face when proving their residency status for tax purposes.

Relevant Facts: Mr. Quy, a mechanical engineer, began working for CBI Constructions Pty Ltd (CBI) in Sydney in 1986 and later accepted overseas assignments.

Mr Quy and his family lived in Dubai from 1998 to 2009, before returning to Perth, Australia in 2009. Mr Quy returned to Dubai in 2015 to take a new job.

 

Ordinary Concept Test

When determining Mr. Quy’s status under the Ordinary Concepts test, the AAT considered him to be an Australian resident.

• During the relevant income years, he owned and paid for a family home in Australia, where at least one of his daughters lived rent-free. 
• He also frequently returned to Australia to spend holidays with his family, intended to retire there after his overseas posting ended, 
• The AAT determined that Mr. Quy’s actions did not indicate that he had made firm plans to leave Australia permanently.

 

If a person’s domicile is in Australia, they are considered an Australian resident for tax purposes, unless they can demonstrate that they have a permanent place of abode outside Australia.

 

The AAT supported the Commissioner’s claims that:

Mr. Quy’s interactions with Dubai and the UAE did not reflect a person who intends to permanently reside there. CBI owned the lease on his Dubai apartment and paid the majority of his utility bills. 

His daily activities made no mention of social networks, friendships, community groups, clubs, or organisations. Mr. Quy then left the UAE after being reassigned to Thailand by the CBI.

Mr Quy was unable to demonstrate in his submissions that his permanent place of residence was in Dubai, so the AAT determined that the Domicile test had been met.

 

Conclusion

The Decision, along with other recent AAT decisions, exemplifies the challenges that taxpayers face when proving their non-resident status.

In cases like this, the taxpayer is responsible for proving that they are not a resident. The AAT found Mr Quy’s evidence and submissions confusing and contradictory.

It is therefore critical that the taxpayer’s evidence and submissions to the ATO or the AAT are comprehensive, consistent, and clear in the first instance, and that appropriate advice is sought before making any residency decisions.

If you have any questions in the International Tax Residence space, give us a call on (02) 9957 4033 to discuss further.