A taxpayer has been unsuccessful before the AAT in arguing that he was not a tax resident of Australia for the 2008-09 income tax year.
Between 4 January 2008 and September 2009, the taxpayer was employed and worked at a worksite at Mukhaizna in Oman [see extract of AAT’s reasons below].
- The Commissioner considered the taxpayer to be a resident for tax purposes and assessed him in respect of his income earned in Oman.
- The taxpayer contended that:
- he was not a resident, or
- if he was a resident, the income was exempt under s 23AG of the ITAA 1936.
- Alternatively, if he was liable to be assessed, the taxpayer argued he was entitled to deductions under s 8-1 of the ITAA 1997 for meals and incidental expenses of $79,920, and to a reduced Medicare levy and shortfall interest charge (SIC) on account of the deduction entitlement.
The residency issue
Ordinary meaning of ‘resident’: in relation to this issue:
- the AAT noted that there did not appear to have been any enduring association or connection with Oman beyond working there.
- By way of contrast, the taxpayer had maintained a continued and significant connection with Australia – this included: family, a home to come back to on visits and to which he returned when his employment ceased, 2 cars, a bank account, offices with an Australian company, and transmission of money to his wife to assist with mortgage commitments. It said the lack of severance of connections with Australia, and the lack of establishment of enduring and lasting living ties with Oman required a conclusion that the taxpayer had not ceased to be a resident of Australia as ordinarily understood [see extract of AAT’s reasons below].
Australian domicile but no ‘permanent place of abode’ outside Australia: Having regard to the taxpayer’s circumstances, the AAT was also of the view that
- he had retained his Australian domicile; and
- did not have a permanent place of abode in Oman or anywhere else [see extract of AAT’s reasons below].
Accordingly, the AAT concluded the taxpayer was a resident within the meaning of s 6(1) of the ITAA 1936 for the 2008-09 year.
The s23AG exemption argument
In relation to the s 23AG argument, the AAT said the taxpayer had not established that the conditions of s 23AG(2) did not apply to him, had not led any evidence that tax was imposed on his earnings from Oman, and had failed to establish the onus to show that s 23AG(1) applied to him to exempt his earnings from Oman from Australian income tax liability for the 2008-09 year.
The s8-1 deductions argument
In relation to the s 8-1 deduction claim, the AAT noted that the Mukhaizna worksite was the taxpayer’s usual place of work. As a consequence, even if it could be established that the amounts claimed as meals and incidental expenses were incurred (which there was no evidence), the AAT said the expenses lacked sufficient nexus with income producing activities and/or were private in nature.
Consequential issues
Accordingly, the AAT also concluded that there was no reduction in the Medicare Levy or SIC. Therefore, the Commissioner’s decision was affirmed.
(Re Landy and FCT [2016] AATA 754, AAT, File No: 2015/0165, O’Loughlin SM, 28 September 2016).
[LTN 29/9/16]
Extract from AAT’s Reasons
THE APPLICATION
- On 29 December 2007 the applicant signed an employment agreement requiring him to provide services at a worksite at Mukhaizna in Oman. On 4 January 2008 the applicant left Australia to take up the new employment role which ended in September 2009, when he returned to Australia. During the 2009 year the applicant: spent the majority of his time outside Australia; had food and accommodation facilities provided to him by his employer at both the Mukhaizna worksite and in Muscat; arranged some rest period accommodation with six other work colleagues in Thailand; used the Thai accommodation for two short periods; had family in Australia; visited family in Australia; supported his wife in Australia; had two motor vehicles in Australia; and had a home available to him in Australia.
- The respondent Commissioner considered the applicant to be a resident for the purposes of the 1936 and 1997 Assessment Acts and assessed him in respect of his income earned in Oman. The applicant disputes the assessment, contending that he was not a resident, or, if he was a resident the income was exempt by reason of s 23AG of the 1936 Assessment Act. It is not apparent that the original objection filed canvassed the s 23AG ground, however the Commissioner was content to embrace it and accordingly the grounds of the applicant’s objection are expanded to include this ground.
- In the alternative, the applicant contends that if he is liable to be assessed, he is entitled to deductions pursuant to s 8-1 of the 1997 Assessment Act for meals and incidental expenses of $79,920, and to a reduced Medicare levy and Shortfall Interest Charge on account of the deduction entitlement.
Was the applicant a resident of Australia as ordinarily understood?
- Having regard to the applicant’s circumstances, there was presence in Oman for work but few other connections with Oman. His work contract was for one year with renewal or extension arrangements. There was bachelor styled accommodation with messing facilities provided and paid accommodation provided in Muscat when he went there. The applicant did not secure any lasting accommodation facilities for himself. His presence in Oman was linked to his employment. The applicant took opportunities when he could to travel to other places during rest periods from work and, in conjunction with work colleagues, secured temporary facilities in Thailand that were used during rest periods. The applicant’s family remained in Australia and he returned to Australia to visit them. On at least one return visit the applicant stayed in the Mt Martha home owned by his wife.
- There does not appear to have been any enduring association or connection with Oman beyond working there. Further, the applicant has maintained a continued and significant connection with Australia: family, a home to come back to on visits and to which the applicant returned when his employment ceased, two cars, a bank account, offices with an Australian company and transmission of money to his wife to assist with mortgage commitments. The sale of two properties before his departure to Oman were not sales of his home at the time of departure. The information supplied on the departure documentation when leaving Australia and other terminations are reflections of the applicant’s subjective views of his position, which are not determinative.
- The lack of severance of connections with Australia, and the lack of establishment of enduring and lasting living ties with Oman require a conclusion that the applicant had not ceased to be a resident of Australia as ordinarily understood.
- There is insufficient connection with Thailand to regard that as a place of the applicant’s residence or place of abode.
‘Permanent place of abode’ outside Australia
- To determine whether a place of abode is a permanent place of abode it is necessary to have regard to the nature and quality of the use made of that place, the continuity or otherwise of the [person’s] presence, the duration of [his/her] presence and the durability of [his/her] association with the particular place. Greater weight should be given to these factors than to that than to a person’s stated intentions. This is an objective analysis. A permanent place of above is a fixed and habitual place of abode without needing to be a permanent home.
- A permanent place of abode outside Australia is not the same as a temporary or transitory place of abode outside Australia.
- Having regard to the applicant’s circumstances set out above, and the conclusions noted at [11] to [14] above, the necessary conclusions are that the applicant had retained his Australian domicile and did not have a permanent place of abode in Oman or anywhere else.