Individual found to be an Australian tax resident

The Administrative Appeals Tribunal (AAT) has found that a taxpayer was an Australian resident for the income years ended 30 June 2007 and 30 June 2008. In doing so, it also affirmed the notices of assessment issued by the Commissioner to the taxpayer for the relevant years.

Background

The taxpayer was a mechanical engineer who worked in various countries including Oman, the United Arab Emirates, France, Korea, and the UK as a contractor, accompanied by his wife, in the 2007 and 2008 income years. During the relevant period, he had sold the Australian property he and his wife lived in and entrusted a relative to sell their motor vehicle. However, the taxpayer maintained his Australian bank account. He contended that in May 2006, he formed an intention to live in the UK, and inspected various properties, but was ultimately unable to live in the UK due to the failing health of his wife's mother. The taxpayer eventually returned to Australia in 2009 where he has since lived and worked, and where he purchased a property in 2012.

The Commissioner issued notices of assessment identifying the taxpayer's income as $116,744 and $161,282, for the 2007 and 2008 years, respectively. The taxpayer argued that residency should be determined on 30 June of each tax year, and that there was no basis in law for adopting the "wide" meaning of the term "resident" as used in the ITAA 1936. He also argued he was generally in Australia to meet his "moral obligations to visit family" and therefore was not a resident for the relevant years. The Commissioner broadly contended that the taxpayer retained a continuity of association with Australia and had an intention to return to Australia, judging by his immigration departure and arrival cards, among other things.

Decision

The AAT rejected the taxpayer's argument that the characterisation of a person's residence in a given tax year is to be determined as at 30 June of that tax year. It held that residency should be assessed over the broader period of the tax year. It also rejected the taxpayer's submissions in relation to the term “resident” as used in the ITAA 1936, and held that the terms "resident" and "resides" pose no ambiguity and should be given their ordinary meaning, having regard to the decision in FCT v Applegate (1979) 9 ATR 899. The AAT said that the taxpayer had strong family connections in Australia and relied on his Australian bank account during the relevant tax years, and that in all his official departure and arrival documentation, he identified himself as a resident returning or a resident travelling to another country for business or employment. It held that the responses point to a strong and continuing residency connection with an intention to return to Australia.

In addition, the AAT said that even though the taxpayer argued that he formed an intention to live in the UK in May 2006, he did not live in the UK during the 2007 year, and after travelling to the UK in 2008, he did not seek to rent or lease premises on his own behalf. In conclusion, it held that the taxpayer had not discharged the onus of proving that he was not an Australian resident under s 6(1) of the ITAA 1936 and affirmed the Commissioner's assessment and amended assessment for the relevant years.

Re ZKBN and FCT [2013] AATA 604, www.austlii.edu.au/au/cases/cth/AATA/2013/604.html.