Resident or Resident Not – What is ATO doing?

3IX37

Following my previous post, I feel there is a need to go above and behind to look at what ATO is doing in relation to this Residency issue lately.

Comparing in last 10 or 20 years we hardly saw any resident cases in court, in this year 2012 alone let’s guess how many resident cases we have had in court already? Let me tell you, so far we have Sneddon case, Sully case, Boer case and Elliott case, 4 cases just in one year and more are expected to come.

Some practitioners might say it does not concern them, or it only applies to very few people, or even better this is arguable so there is no need to worry. Those might all be true. But for these so-called random and unimportant cases, ATO has already taken 4 of them into court this year alone. What are these facts telling us? I guess it is called an overlooked issue in practice for a reason.  

Let’s look at what happened in these cases mentioned above:

Sneddon case – I have already explained this case in my previous post. Let’s skip it.

Sully case:
Taxpayer is a marine engineer, worked overseas for a company, and he claimed his employment income from overseas should not be taxable in Australia. Commissioner challenged it and won, the tribunal upheld the commissioner’s decision that the taxpayer was Au resident for those years.

Boer case:
Taxpayer is a technician in the oil and gas industry, went offshore working. He contends as he was not an Au resident, his income from overseas should not be taxed. Tribunal again affirmed ATO commissioner’s decision that the taxpayer was Au resident.

Elliott case: (This is very interesting case)
Taxpayer was an airline pilot working for a Hong Kong based company (ABL). For his 06 & 07 returns, he claimed his salary as foreign employment income, which was exempt under previous s.23AG. After the Federal court decision on ABL v FCT 2009, ATO issued amended notices of assessment treating taxpayer’s wages for all those years as assessable incomes.

Taxpayer won his case not by arguing that he was not a resident for those years, but strategically he argued that Commissioner was not entitled to amend his assessment after 2 years the original notices of assessment was issued.
The tribunal upheld the taxpayer’s argument that the amended assessment issued after 2 years were unlawful based on the fact that taxpayer disclosed his foreign income and Commissioner was aware of them from the original returns. The legislation does not require a taxpayer to correctly identify income from a foreign transaction at a correct label on the tax return, but only to identify such income (reg 20 item 5 ITR1936)   

Subsequently ATO withdrew its both tax decision TD93/156 concerning whether a refund notice is an assessment and TD2004/24 concerning deemed assessments lodgement of a non-taxable return. This might not be a related event, but one might think ...

References:
http://www.austlii.edu.au/au/cases/cth/AATA/2012/582.html
http://www.austlii.edu.au/au/cases/cth/AATA/2012/574.html
AAT ref: [2012] AATA 428 (E Fice, Senior Member), 9 July 2012, Melbourne.

3IX37

5 Oct 2012, ATO issued a Decision Impact Statement in relation to Elliot Case mentioned above, this is a good read for those are interested.

http://law.ato.gov.au/atolaw/view.htm?docid=%22LIT%2FICD%2F2011%2F3225-3226%2F00001%22

3IX37

One more resident case

The following summary is from ICAA Tax Bulletin on 10Dec 2012

> Bezuidenhout and Commissioner of Taxation [2012] AATA 799

In Bezuidenhout and Commissioner of Taxation [2012] AATA 799 (15 November 2012), the Tribunal found that a pilot was a resident of Australia within the meaning of s 6(1) of the Income Tax Assessment Act 1936 during the relevant years.

The taxpayer was a pilot who worked overseas for a foreign employer in the 2006, 2007 and 2008 years of income. He claimed that this income was not assessable because he was a foreign resident at the relevant times.

However, the Tribunal concluded that he was clearly a resident. Relevant factors included that he migrated to Australia in 2005 with his family on a business migration permanent resident visa, eventually applying for citizenship in 2010. He retained private health cover in Australia, had mainly Australian assets and held an Australian drivers’ licence. Most of his remuneration was remitted to Australia to maintain his family. Records provided by the Commissioner also suggested that the taxpayer spent the majority of days in each year in Australia.

The Tribunal also affirmed the Commissioner’s decisions on penalties, finding that the taxpayer acted recklessly in relation to the 2008 year.  As the taxpayer did not produce returns for the 2006 and 2007 years of income until long after they were due (making the same error as above), he was liable to an administrative penalty pursuant to s 284-75(3) of Schedule 1 to the Taxation Administration Act 1953, being 75% of the tax-related liability concerned (item 7 of s 284-90).


http://www.austlii.edu.au/au/cases/cth/AATA/2012/799.html

Poweregg

ATO‘s view

尽量让你成为 税务居民 来缴税

but

你子女不可以利用你是税务居民来offset

双重rule

jocelyn555

弱弱问一下，嗯， 如果PR，2012年10月-2013年1月初 住在澳洲，2013年一月份投资房settlement， 这样2013年报税的时候， 算不算australian resident for tax purposes 呢?

感谢指教  

3IX37

jocelyn555 发表于 2012-12-15 21:07
弱弱问一下，嗯， 如果PR，2012年10月-2013年1月初 住在澳洲，2013年一月份投资房settlement， 这样2013年 ...

No worries.

You can refer to the below post link for more information if you are interested.

http://www.oursteps.com.au/bbs/f ... ;page=1#pid11523148

As this is a very controversial topic, and there is no single fact is determinative indicia, it can hardly have an absolute answer of right and wrong even with all facts provided.

However, merely based on the facts presented by you, you are more likely to be an AU tax resident for 2013 income year.   Again, this is not conclusive, and the determination will change with any additonal facts.

hsqhugh

Accountants never speak Chinese

jocelyn555

3IX37 发表于 2012-12-17 08:32
No worries.

You can refer to the below post link for more information if you are interested.

thanks a lot

i will have a look at it

i appreciate it

yw0830

jocelyn555 发表于 2012-12-15 22:07
弱弱问一下，嗯， 如果PR，2012年10月-2013年1月初 住在澳洲，2013年一月份投资房settlement， 这样2013年 ...

Staying from Oct 2012 to early Jan 2013 (less than 183 days), might not be a tax resident of Australia.

However, you might be a tax resident if the following conditions were met:

1. You have Medicare card & private health insurance.
2. Majority of your family members (wife and children) were living in Australia.
3. You have large sum of term deposits rather than just simple bank accounts for managing your rental property.
4. You have bought your own principal residential house other than investment property.
5. You have set up your own business in Australia.

jocelyn555

yw0830 发表于 2012-12-18 22:23
Staying from Oct 2012 to early Jan 2013 (less than 183 days), might not be a tax resident of Austr ...

thank u for your time and your words are quite helpful

cause i am not stay in australia,  my property will be rent out,  probability, i am not an australia for tax purpose.

3IX37

jocelyn555 发表于 2012-12-18 22:59
thank u for your time and your words are quite helpful

cause i am not stay in australia,  my prop ...

Since you are an AU PR leaving AU, the relevant test is Domicile test, provided reside common law test is not satisfied.

In order for the Commissioner satisfies that you are not an Au resident, you need to establish that you have a permanent place of abode overseas. please refer to the above mentioned link for more information.

JohnnySu

jocelyn555 发表于 2012-12-15 21:07
弱弱问一下，嗯， 如果PR，2012年10月-2013年1月初 住在澳洲，2013年一月份投资房settlement， 这样2013年 ...

You need to look at other factors to determine if you are resident

e.g. was your intention to come back and stay in Australia in near future? if you keep a residence in Australia? Where is your family? If you have significant investments in Australia? ...... If you are coming back in soon than it is very likely you are resident for tax purposes.

Resident or not you will have to pay tax on the rental income because it is Australian source but different tax rates apply.

michael.jyu

3IX37 发表于 2012-12-19 09:33
Since you are an AU PR leaving AU, the relevant test is Domicile test, provided reside common law  ...

No comments!

3IX37

michael.jyu 发表于 2012-12-19 09:12
No comments!

??? Anything wrong?

3IX37

jocelyn555 发表于 2012-12-18 22:59
thank u for your time and your words are quite helpful

cause i am not stay in australia,  my prop ...

Further to our CA's comment, those facts tested in his or her comment are all under reside common law, which is the most controversial. My previous comment however was based on the assumption that the reside common law was not satisfied. I hope it clarifies things.

jocelyn555

taxbreak 发表于 2012-12-19 09:48
You need to look at other factors to determine if you are resident

e.g. was your intention to co ...

many thanks

that's helpful

JohnnySu

3IX37 发表于 2012-12-19 16:01
Further to our CA's comment, those facts tested in his or her comment are all under reside common  ...

If someone satisfies the domicile test he/she can still be non-resident if it can be established that a permanent place of abode is overseas. For this purpose you have to consider family and social ties.

3IX37

taxbreak 发表于 2012-12-20 08:34
If someone satisfies the domicile test he/she can still be non-resident if it can be established t ...

If the Tax Commissioner is satisfied that the person has a permanent place of abode offshore, he or she would not satisfy domicile test, because the permanent place of abode is the negative limb of domicile test. It is a part of the test. (under the subparagraph (a)(ii) in the definition of resident in s.6(1) ITAA1936).

all the family and social ties would usually be considered under reside common law test. Having said that, under domicile test, the positive limb of domicile is also common law concept, which would also consider those facts.

And according to the House of Lords in Applegate case, one should always consider the reside common law test prior statutory test (domicile test, 183 days test, and commonwealth super fund test) when determining the AU tax residency.

In brief, the decision tree under the definition of resident for individual in s.6(1) is as follows:

1) is the taxpayer an AU resident under reside common law test? if not, go step 2)
2) is the taxpayer an AU resident under one of the statutory tests?
- Domicile test;
- 183 days test, or
- Commonwealth superfund test.

PS. Domicile test is mostly used for Au residents leaving AU, while the 183 test and Superfund test are mostly used for Non-resident arriving Au.

I hope this can clarify some confusion of the legal concepts.