Home is not where the taxpayer is: Quy v Commissioner of Taxation

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) held that a taxpayer remained an Australian resident for tax purposes despite being physically in Australia for less than 2 months each year.

On consideration of the taxpayer’s ties to Australia, the AAT held that the taxpayer satisfied the ‘Ordinary Concepts’ and ‘Domicile’ tests of Australian tax residency.

This case highlights the significant complexities that individuals can face when proving their residency status for taxation purposes.

Relevant Facts

The taxpayer, Mr Quy, was a mechanical engineer who commenced employment with CBI Constructions Pty Ltd (CBI) in Sydney in 1986 and later accepted work assignments from CBI overseas.

Mr Quy lived with his family in Dubai from 1998 to 2009 and returned to Perth, Australia in 2009. In 2015, Mr Quy moved back to Dubai on a new work assignment with CBI.

Mr Quy objected to his tax assessments on the basis that he was a non-resident and sought a refund of PAYG tax withheld by CBI for the 2016 to 2020 income years.

Ordinary Concept Test

The Ordinary Concept test considers whether an individual resides in Australia under the ordinary meaning of the word “resides” which is a question of fact. In determining this, factors such as period of time in Australia, family ties and behaviour whilst in Australia must be considered.

In determining that Mr Quy was an Australian resident for the purpose of the Ordinary Concepts test, the AAT considered that Mr Quy:

• continued to own and pay the costs associated with a family home located in Australia where at least one of his daughters resided rent-free throughout the relevant income years;
• frequently returned to Australia to stay with his family in the family home during holiday periods;
• intended to return to Australia to retire after the expiration of his overseas posting;
• had maintained vehicle registrations and his Australian drivers licence for use when he returned to Australia;
• held a visa and accommodation in the UAE which were tied to the length of his employment assignment;
• had failed to demonstrate that he had any connection to the UAE other than his employment; and
• had maintained his Australian health insurance throughout the duration of his overseas posting.

Despite being in Australia for less than two months each year, the above circumstances resulted in a decision by the AAT that Mr Quy maintained an intention to return to Australia and an attitude that Australia remained his home. The AAT held that there was no demonstrated behaviour of Mr Quy consistent with the formation of any definite plans to abandon Australia completely.

His wife’s residency status, while not determinative of Mr Quy’s own residency status, significantly strengthened Mr Quy’s ties to Australia during the relevant tax years.

Domicile Test

A person will be an Australian resident for tax purposes if their domicile is in Australia unless they can show their permanent place of abode is outside Australia.

In relation to the Domicile test, the AAT held that the Applicant had a domicile of choice in Australia, and there was no evidence to suggest otherwise. Mr Quy’s submissions in relation to whether his permanent place of abode was in Dubai were contradictory and did little to support his position.

The AAT agreed with the Commissioner’s contentions that:

• the quality of Mr Quy’s engagement with Dubai and the UAE was not consistent with a person who intends to, or in fact does, permanently reside there;
• the lease on the apartment in Dubai that Mr Quy lived in was in the name of CBI, which also paid most of his utility bills;
• Mr Quy’s HSBC bank account, into which CBI paid a portion of his income, showed minimal discretionary or leisure spending in Dubai beyond food purchases;
• the apartment was furnished with an allowance from CBI and the photographs of the apartment did not show furniture indicative of setting up a new home. The fact Mr Quy did not ship the furniture to Thailand when he left Dubai reinforced the transient nature of those items;
• Mr Quy did not provide the Australian Taxation Office (ATO) with any community groups, clubs, or organisations that he was associated with in Dubai and his description of daily activities did not have any references to social networks, friendships, community groups, clubs, or organisations; and
• upon reassignment to Thailand by CBI, Mr Quy left the UAE and plans to spend his retirement in Australia.

Mr Quy was unable to prove in his submissions that his permanent place of abode was in Dubai, and the above considerations led the AAT to the conclusion that the Domicile test was satisfied.

Conclusion

The Decision and other recent decisions made by the AAT demonstrates the difficulties that taxpayers face when proving they are non-residents.

Mr Quy’s wife and adult children remaining in Australia and living in the family home were significant factors in this case. This contributed to the AAT’s decision that Mr Quy maintained an intention to return to Australia and an attitude that Australia remained his home. However, and as the AAT states, this factor is not determinative in the modern globally mobile world.

In cases such as this, the burden of proof is on the taxpayer to prove that they are a non-resident. The evidence and submissions provided by Mr Quy were criticised by the AAT, who said that they were confusing and contradictory.

It is important then that evidence and submissions provided by the taxpayer to the ATO or the AAT are thorough, consistent and clear in the first instance and that proper advice is sought before any residency decisions are made.