Taxpayer Australian resident despite seven-month employment in Kuwait

A taxpayer who returned to Australia after a seven-month contract position in Kuwait has failed to convince the AAT that he was not an Australian resident. He was held to be a resident of Australia under s6(1)(a) of the ITAA 1936, meeting all three statutory residency tests. It included the taxpayer’s foreign source income in his assessable income for the 2016 year.

The taxpayer resided with his family at a home he owned in Brisbane. He was employed by the Queensland Government but accepted a seven-month contract position in Kuwait that commenced on 14 September 2015. He returned to Australia on 21 March 2016 at its conclusion. For the period he was working in Kuwait, he took leave without pay from his Australian employment, and returned to it after completing his contract in Kuwait.

During the period he was working in Kuwait, the taxpayer did not offer his Brisbane home for rent or sale and, largely left his furniture and personal effects in-situ. He took with him limited personal items to Kuwait. He maintained investment properties and bank accounts in Australia throughout the 2016 year. He also maintained his private health insurance in Australia, despite the option to cancel it and seeking a refund of premiums paid but not used. His visa and accommodation in Kuwait arranged by his employer were tied to the length of his employment contract.

The taxpayer said that had he intended to work overseas, primarily in Kuwait for 10 years, returning to Australia occasionally to visit family. However, after his contract ended, he did not seek further employment in Kuwait and returned to Australia due to his poor health. He did not seek medical treatment overseas for his personal medical issues. He had arranged through the Medicare system to have medication dispensed in Australia and sent to him in Kuwait.

The taxpayer was present in Australia during the 2016 year for 187 days, having returned in between for visits. The Commissioner considered the taxpayer an Australian resident for taxation purposes during the 2016 year and included in assessment the amount he had earned from his employment in Kuwait. The Commissioner disallowed the taxpayer’s objection to his decision. The taxpayer applied to the AAT for review of the Commissioner’s decision.

The AAT found that the taxpayer was a resident under ordinary concepts, the domicile test and the 183-day test. Despite his absence from Australia for seven months and intention to work outside of Australia for up to 10 years, various factors indicated he maintained an intention to return to Australia and an attitude that Australia remained his home during the 2016 year. He did not establish a connection with his residence in Kuwait, did not seek further employment and returned to Australia. Australia was also the taxpayer’s domicile of choice. He had neither abandoned his residence in Australia nor established a permanent place of abode in Kuwait. The taxpayer satisfied the first limb of the 183-day test being present in Australia for more than half the 2016 year. His usual place of abode was his home in Brisbane, in the 2016 year, before, after and during his employment in Kuwait. The taxpayer’s argument that this test did not apply to him was rejected.

Source: Arjunan v FC of T [2020] AATA 4024, 13 October 2020.