Talking Tax – Issue 194

Background

The Taxpayer was a recent university graduate who previously resided and studied in the UK. The Taxpayer disposed of substantially all of his UK assets and, with his partner, travelled to the Philippines, New Zealand, and then Australia.

The Taxpayer had originally applied for a 476 visa (for skilled graduates) with the intention of permanent skilled work in Melbourne. Due to protracted processing times, this application was withdrawn in favour of an application for a shorter-term 417 working holiday visa, which was granted.

While in Australia, the Taxpayer and his partner enjoyed a brief stint in short-term accommodation, then a 6-month stay in a Southbank apartment and a 3-month stay in a house in Fitzroy.

The Taxpayer applied for work in the engineering field in which he was qualified, but was unsuccessful. After two months, the Taxpayer found long-term employment with the Bayside City Council in a customer service role. The Council later offered him an engineering role, but this was withdrawn when his visa situation was disclosed.

The Taxpayer and his partner returned to the UK in December 2017, initially living with the Taxpayer’s parents before securing other rental accommodation. When back in the UK, the Taxpayer continued to engage in the same types of activities and generally lived the same lifestyle as he did in Melbourne.

Assessment by the Commissioner

The Commissioner asserted that the Taxpayer was not a resident of Australia for income tax purposes and assessed him accordingly.

The Commissioner asserted that the Taxpayer’s intention to reside in Australia was contingent on a future event occurring (obtaining an engineering job) and, as the Taxpayer grossly underestimated how difficult this would be and was in fact unable to secure the desired employment (being the contingent event), the intent could not have been present.

The Commissioner sought to rely on the following:

• the Taxpayer did not identify himself as a ‘resident’ on his incoming passenger card;
• the Taxpayer entered Australia on a working holiday visa, which in the Commissioner’s view indicates a clear temporary intent as it is only to be granted to a person who is a genuine visitor whose principal purpose is to spend a holiday in Australia;
• the Taxpayer kept some belongings at his parents’ home in the UK, and had his mail sent there, which amounted to the Taxpayer maintaining a foreign place of residence; and
• the Taxpayer’s ‘habits and conduct’ did not reflect the settled way of life of a resident; his living and work arrangements reflected the itinerant nature of his working holiday. He maintained a continuity of association with the UK and did not establish one with Australia.

Decision

The Tribunal held that the Taxpayer was a resident of Australia and remitted the matter to the Commissioner for amendment of the Taxpayer’s assessment.

In reaching this decision, Deputy President O’Loughlin noted:

• the Taxpayer’s ‘settled way of life’ (beyond work and accommodation) revealed little change as between his time in the UK and in Australia;
• the fact that the Taxpayer entered Australia on a working holiday visa may be indicative of his intention, but it should not be determinative. The circumstances in which the documents were completed must be considered, which is relevant in this matter;
• statements made in incoming and outgoing passenger cards are relevant but are not of overwhelming significance in all of the circumstances. Again, these statements must be considered in context – the Taxpayer completed the cards in the belief that citizenship and residence were the same in this context;
• an individual with no ongoing care or other responsibilities for dependent family members in another country stands in a much different position to those who do. Merely having family members who reside in a foreign country does not add material weight to a suggestion of retained UK residence; and
• had the Taxpayer’s intended employment arrangements worked out, he would have resided in Australia for a longer period. The Taxpayer had a relationship with a person in Australia with him and intended to make his life in Australia, but was unable to alter his visa and work arrangements.

The Tribunal specifically distinguished this case from the recent Full Federal Court decision in Addy and Tribunal decision in MacKinnon, stating that the facts of these cases ‘stand in stark contrast’. In Addy, the taxpayer’s work and living arrangements, and genuine maintenance of a residence In the UK, were more transitory and consistent with someone on a working holiday. In MacKinnon, the taxpayer arrived with a temporary intention and later decided she wished to stay longer, but never formed a genuine intention to be anything more than a working holidaymaker.