Thinking | 8 March 2019
Talking Tax – Issue 151
Welcome decision for expats: Harding appeal clarifies meaning of ‘non-resident’
In Harding v FCT  FCAFC 29, the Full Federal Court allowed the taxpayer’s appeal, finding that an Australian living and working in the Middle East was not an Australian tax resident. This case is a welcome development for expatriates currently working or seeking to work overseas, as it clarifies certain circumstances in which a person will be no longer be considered an Australian tax resident.
The question in Harding was whether the taxpayer, an Australian citizen who from 2009 to 2014 worked in Saudi Arabia and lived in Bahrain in a furnished apartment, was an Australian tax resident for the 2011 income year. Broadly, section 6 of the Income Tax Assessment Act 1936 (Cth) (ITAA36) provides that a person will be an Australian tax resident if they ‘reside’ in Australia, unless the Commissioner of Taxation (Commissioner) is satisfied that their ‘permanent place of abode’ is outside Australia.
The Full Federal Court did not agree with the Federal Court’s decision in Harding v FCT  FCA 837 that the taxpayer did not have a permanent place of abode outside Australia due to his accommodation in Bahrain being temporary.
On appeal, the Full Federal Court took a broader approach, finding that while the nature of a taxpayer’s accommodation is relevant, the full circumstances of the taxpayer such as their connection to their overseas country, city or town, should inform whether or not their overseas place of abode is permanent.
It held that several factors pointed to the taxpayer’s residence in Bahrain being sufficiently permanent, including that the taxpayer had:
- enrolled his son in a school in Bahrain;
- continuously encouraged his wife to move from Australia to Bahrain;
- bought a second car for his wife to use once she relocated to join him in Bahrain;
- was not prepared to alter his career plans in the Middle East by returning to Australia; and
- was seeking to purchase a larger property for his family once they relocated to Bahrain.
This decision is timely, given the Federal Government is soon to consider the Board of Taxation’s 2017 Review of the Income Tax Residency Rules for Individuals (Review). The Review recommends replacing the current rules with a simplified residency test, comprising a ‘days count’ residency status and an assessment of individual circumstances. For now, however, the issue of whether a taxpayer has ceased their Australian tax residency remains a question of fact and will require an assessment of their personal, economic and social circumstances.
To find out more about your tax residency status and the potential implications of Harding, please contact Anthony Bradica.
New tax whistleblower reforms: what you need to know
The Treasury Laws Amendment (Enhancing Whistleblower Protection) Bill 2018 (Bill) will come into effect on 1 April 2019, after being passed by Federal Parliament on 19 February 2019. By the end of the year, many companies will be required to comply with new initiatives to protect corporate whistleblowers.
The Bill creates a consolidated whistleblower protection regime for the corporate, financial and tax sectors, and introduces new protections for tax whistleblowers not available under the existing laws. Here’s what you need to know to know about these major reforms.
The Bill amends:
- the Taxation Administration Act 1953 (Cth) (TAA) to create a whistleblower protection regime for disclosures of information by individuals regarding breaches of the tax laws or misconduct in relation to an entity’s tax affairs;
- the Corporations Act 2001 (Cth) (Corporations Act) to strengthen and consolidate whistleblower protections for the corporate and financial sector; and
- repeals the financial sector whistleblower regimes and clarifies transitional arrangements.
The tax-related reforms insert a new Part IVD into the TAA (which will run in parallel to the similar regime inserted in the Corporations Act). It provides that a disclosure made by an ‘eligible whistleblower’ (an employee, officer, associate, contractor or supplier of an entity, and their spouse or dependents) in relation to an ‘entity’ is eligible for protection where it is disclosed to:
- the Commissioner, and the whistleblower considers that the information may assist the Commissioner to perform their functions or duties under a taxation law in relation to the entity or an associate; or
- an ‘eligible recipient’ (such as an auditor, tax agent, company director or trustee) and:
- the whistleblower has reasonable grounds to suspect that the information indicates misconduct, or an improper state of affairs or circumstances, in relation to the tax affairs of the entity or associate; and
- the whistleblower considers that the information may assist the eligible recipient to perform functions or duties in relation to the tax affairs of the entity or an associate of the entity; or
- a legal practitioner for the purposes of obtaining legal advice or representation on the operation of the whistleblower regime.
Such ‘eligible whistleblowers’ will be entitled to identity protections, anti-victimisation measures, and certain immunities from liability.
In contrast to the Corporations Act amendments, Part IVD of the TAA does not include provisions to protect emergency disclosures to a journalist or a member of Parliament.
Under the Corporations Act reforms, public companies, large proprietary companies and proprietary companies will be required to have a whistleblower policy, with strict financial penalties for non-compliance.
For advice on how to respond to these significant changes to the corporate landscape, please contact our team.
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