For the majority of taxpayers tax residency is simple and straight forward, however, for an increasing number of people it is a complex fluid position.   In recent years, individuals have travelled more for work or even relocated for work purposes, however, not always do family members follow, especially when children are of school age.

The ATO’s position will often be one where they adopt the position that a person is a tax resident of Australia (Australia then gets to tax worldwide income), however, this may not be the case.

In the case, Bulie and Commissioner of Taxation, the tribunal held that an individual was resident in Singapore and not Australia under the Double Taxation Agreement (DTA) and therefore overturned the ATO’s position.

The case involved a taxpayer who had lived and worked in Singapore since 2018 whilst his wife and youngest child remained at the family home in Sydney. He returned to Australia periodically, spending roughly 38% of his time there across five income years.

The ATO asserted that the individual was resident of Australia under the DTA tie breaker provisions (which apply when an individual is resident of two jurisdictions under the respective domestic laws). Accordingly, the ATO issued assessments taxing the individual salary and wages earnt whilst working in Singapore.

The tie breaker provisions look at where an individual’s personal and economic relations are closest to.  In this regard the Tribunal determined that little weight should be given to his remaining Australian ties including private healthcare and bank accounts characterising these as “a function of the administrative realities and conveniences of dual residency.”

The Sydney home, whilst owned was not income-producing and did not shift the centre of gravity of his economic life. The Tribunal focused on the centre of the individual’s day to day life and source of his economic activity.  It noted that the individual’s personal and economic ties to Singapore were stronger than those to Australia during the relevant income years.

The decision confirms that the tie-breaker analysis is holistic, not a simple tallying of ties to each country. Whilst maintaining a family home, financial accounts and health cover in Australia are clear ties to Australia, it does not automatically result in Australian tax residency.  The decision by the tribunal is interesting given the individual had a wife and child living in Australia during the relevant period, which would generally be viewed as creating strong personal ties to Australia.

The tax residency rules for Australia were subject to a review in 2019 with proposed changes floated, however, no legislative changes have yet seen the light of day.  Perhaps this is another one of the tax reforms the Federal Government will seek to introduce.

If you have any questions as to how this decision may impact your position, please don’t hesitate to reach out to your ESV Engagement Partner.