Many Australian expatriates residing overseas may regard themselves as no longer Australian residents for tax purposes. Many believe they have nothing to do with the Australian Taxation Office anymore or at least for the period they are residing overseas.
Unfortunately this school of thought can get expats into trouble and if they have never reviewed their Australian tax position since leaving the country, they could be at risk.
The following case study highlights the importance of staying on top of this tax issue.
AAT Case [2013] AATA 130; Re Mayhew and FCT
In a recent court case, the taxpayer commenced his employment with an engineering company in Abu Dhabi in December 2007. He leased his family home in Brisbane to his son and his wife also did not join him for the first 16 months. The taxpayer argued that although he maintained ownership of the Brisbane residence, neither he nor his wife had any intention to live in it again. Therefore, he thought himself is not tax resident for Australian tax purposes in the financial year ended 30 June 2008.
However, the Commissioner took a different view of his case and still contended the taxpayer was still a resident of Australia during the year in question. The commissioner amended the taxpayer’s assessment for the 2008 income year and included an additional $52,521 as assessable foreign source income, derived from the taxpayer’s employment in the United Arab Emirates (UAE).
This case took five years fight between the commissioner and the taxpayer and finally in last month, the tribunal ruled in favour of the taxpayer and concluded that the taxpayer handled his departure from Australia, and his relocation to the Middle East, “in a manner consistent with a person who had resolved to permanently leave Australia”. The taxpayer had a permanent place of abode outside of Australia and was therefore not a resident of Australia for tax purposes.
What you can learn from this case:
- Even if you have left Australia and have started your employment overseas, the tax Commissioner can still view you as an Australian resident for tax purposes.
- In Re Mayhew’s case, the taxpayer handled his departure in a manner consistent with a person who plans to leave Australia permanently and he established a permanent place of abode outside of Australia and was therefore the tribunal held that the taxpayer was not a resident of Australia for tax purposes.
- However, many of you may not have handled your departure correctly when you left Australia in order to be treated as foreign residents for Australia tax purposes.
Our Tips
- Your personal relationship with Australia may change from time to time so it is important for you to review your Australian tax residence status on yearly basis.
- There are four tests that can be used to determine your residency, and you can find more information about these on the ATO website:
o The resides test
o The domicile test
o The 183 day test
o The superannuation test
Our staff in both our Shanghai and Sydney offices are here to assist with any concerns you may have about your personal situation and can be contacted at ourteam@azuregroup.com.au.
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