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Re: Confirmation of tax residence

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Hi,

I am an Australian citizen who returned from the UK in mid Dec 2020.  I have been non-resident for Australian Tax for the last 25 years.  Am I now Australian Tax resident? 

I believe the relevant facts are:

  1. I own a house in both the UK (acquired 2007) and now Australia.
  2. My siblings and parents reside in the UK.  My adult children reside in Australia.
  3. I own and run a UK online business.  All my income derives from this business.  I am the treasurer of a UK charity of national / international standing.
  4. We intend to stay in Australia to help care for my wife’s mum (93) who can no longer live alone.  Clearly this is for an unknown period, but likely 2 – 5 years.  We do not know what we will do after this period.
  5. We intend to visit the UK (when circumstances permit) for up to 3 months at a time to visit my parents / siblings and maintain my business relationships.  During this time my wife’s British brother will visit Australia to visit/care for his mum.

I suspect, but do not know, that we will count as UK resident if we visit for more than 45 days between now and April 5th 2022.  By then we will have spent more than half of two tax years in Australia.

How does the process of getting a definitive answer from two ‘competing’ tax authorities work in such cases?  Should we do anything now, or is all this handled when we submit our tax return?

Thanks very much for your help.

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ATO Community Support

Replies 6

Hi @Mark101,

 

For Australian tax purposes, there are a few tests to use to determine your residency. We even have a tool that can help you work it out.

 

Using the Are you a resident? tool, it appears you'll be a resident for tax purposes.

 

There is no Australian law which says your tax residency will change if you visit overseas for a set number of days during the year once you're here. There may be a UK law about this for UK tax, though, so check with HMRC.

 

If you're also a resident in the UK for tax purposes, you'll need to rely on the tax treaty we have with the UK.  Most tax treaties include a 'tie-breaker' test to tell which location you're a resident for tax purposes in.

 

You can read more about your tax residency, access the Am I a resident? tool, and find out about tax treaties on our website.

7 REPLIES 7

Most helpful response

ATO Community Support

Replies 6

Hi @Mark101,

 

For Australian tax purposes, there are a few tests to use to determine your residency. We even have a tool that can help you work it out.

 

Using the Are you a resident? tool, it appears you'll be a resident for tax purposes.

 

There is no Australian law which says your tax residency will change if you visit overseas for a set number of days during the year once you're here. There may be a UK law about this for UK tax, though, so check with HMRC.

 

If you're also a resident in the UK for tax purposes, you'll need to rely on the tax treaty we have with the UK.  Most tax treaties include a 'tie-breaker' test to tell which location you're a resident for tax purposes in.

 

You can read more about your tax residency, access the Am I a resident? tool, and find out about tax treaties on our website.

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Replies 5

Hi Blake,

 

Thanks for your reply.  Yes, I believe I meet the definition of residence for both the UK and Australia. 

The relevant treaty is not helpful.  Because I have a home in both countries, and am a national of both countries, the treaty simply states: 

Article 4 Clause 3.     

(c)     if the individual is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement.

Is there any further guidance / process I can follow?  I have asked the same question of HMRC, but suspect the answer will be that it will depend on whether I spend >90 days in the UK between now and 5 April 2022.  Given I am likely to do this (but I don't have a crystal ball, and Covid complicates matters!), will the 'resolution/mutual agreement' only take place in hindsight?

 

Thanks for your help,

 

Mark

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Replies 4

For others reading this thread, I have found extensive guidance on this area in this link.  The link strictly applies to business cases, but I assume something similar will apply to individuals: https://www.ato.gov.au/Business/International-tax-for-business/In-detail/Mutual-agreement-procedure/...

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I believe the 'system' that usually applies in these cases for individuals is that if the individual is treated as tax resident in both countries (in this case the UK and Australia), with each tax authority then allowing double tax relief (Aus = foreign income tax offset , or FITO) for tax on income first taxed in the other country.  So 2 tax returns, and each source of income will need to be accounted for under each of the two tax regimes, with the total tax being likely to be at least that of the higher taxing regime.
UK National Insurance is not treated as a tax for FITO purposes under this ruling: https://www.ato.gov.au/law/view/view.htm?docid=EV/1051360526275&PiT=99991231235958.  (Despite NIC's being little more than income tax in disguise: https://publicmatters.org.uk/2018/03/29/the-myths-and-legends-of-hypothecated-national-insurance/ )

And my UK company, who continues to employ me for work I do whilst resident in Australia, must also 'provide the super guarantee' for income I earn whilst resident in Australia... as well as paying (non deductible) NI contributions.  I guess at least the super goes into a fund!

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... And the UK company that I and my wife own is now Australian resident too (as well as UK resident), so 2 tax returns there too ... ?

ATO Community Support

Replies 1

Hi @Mark101

 

As a dual tax resident its recommended you contact our Early engagement team about your situation. This will assist in making a determination about your residency status under the relevant double tax agreement.

 

See our website for details to request and Early engagement discussion.

 

Ari

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Thanks for your reply Ari, I shall do so.