The recent Federal Court decision in Harding v FC of T  FCA 837 provides some clarity on the tax residency of individuals and sheds some light on the uncertain area of law. The case examined residency according to ordinary concepts and domicile test in regards to Mr Harding’s circumstances, and the courts have looked at various evidences in reaching the conclusion.
The terms “resident” and “resident of Australia” are defined in subsection 6(1) of the ITAA 1936 as:
(a) a person, other than a company, who resides in Australia and includes a person;
(i) whose domicile is in Australia, unless the commissioner is satisfied that the person’s permanent place of abode is outside Australia.
The term ‘reside’ is not defined in the act, and hence takes its ordinary meaning as per the Oxford English Dictionary as “to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place”.
The test does seem relatively straight forward where the person’s work and home coincides, however, it does become complicated when a person maintains a home in one place but works in another. So both the ‘presence’ and ‘intention’ of a person is an important element of one’s tax residency status. Where a person has more than once residence, there needs to be consideration of the connecting factors or the continuity of association between the person and the particular location. Some of the factors include:
- Maintenance of family home
- Family unit and where they live
- Possessions and where they are stored
- Relationship with people and institutions
So despite being physically absent in one location, depending upon connecting factors to that location, a person may well be viewed as having maintained a presence in the community as a resident for tax purposes.
Ascertaining the person’s intention depends on the facts and circumstances surrounding their mode of living, and the courts in Harding’s case have considered the following additional factors as an indication to continuing intention to reside in one country:
- Outgoing and incoming passenger cards for international travel (indication of whether Australian resident departing temporarily and/or resident returning to Australia);
- Employment (location of full time work);
- The nature of accommodation and living arrangements;
- Lifestyle and living conditions;
- Return trips to Australia and how often;
- Financial matters including bank accounts and investments.
The residency status of a person depends on facts and circumstances of each case, and the above summary should be considered a general guide only. If you like to know more about tax residency rule and how it may apply to your situation, please contact one of our experts at Hoffman Kelly.