Letter of Advice on Tax Residency

This letter provides advice on tax residency for Mr. Jack Johnson, an Australian citizen residing in Bahrain. It discusses the criteria for tax residency and concludes that Mr. Johnson is a tax resident of Australia.

LETTER OF ADVICE ON TAX RESIDENCY
Introduction or Facts of the case
Mr. Jack Johnson, an Australian born Citizen has been residing in Classic Towers, Road No
2417, Manama, Bahrain from June 2017 in lieu of his employment in TQ Education Limited.
Mr. Jackson has a family of four which includes his wife and two children. In the past 3 years
of his career, Mr. Jackson had been staying mostly out of the country with his last movement
to Bahrain with an intention of not returning back to the country. Mr. Jackson has a home in
Tweed Heads where he resided when he was in the country along with his family. Also,
family of Mr. Johnson still abode the place post his leaving the country in lieu of his job to
Bahrain. While moving to Bahrain, Mr. Johnson took all his belongings with an intention of
never returning back. However, he visited the country two times to meet his family. On the
basis of above, Mr. Johnson wishes to know his tax residency for the year ended June30,
2018.
Analysis
In terms of Australian Income Tax Assessment Act, 1997 and other residency rules, the term
reside has not been defined. Accordingly, the meaning of the term is imported from Shorter
dictionary of Oxford wherein the meaning of the term resides has been defined as under:
'...to dwell permanently, or for a considerable time, to have one's settled or usual abode, to
live, in or at a particular place...'
Thus, person falling under the above categories shall deemed to be a resident of Australia, if
he dwells permanently or for a considerable period of time in Australia.
Further, one needs to dwell further to understand the tax residency of an individual. The
following factor shall be considered for determining the tax residency of an individual:
(a) Intention or Purpose of presence in Australia: This is one of the significant test for
determining the tax residency of an individual. Since in 2017-18, Mr. Jackson did not
stay in Australia for a single day in 2017-18 and he left with an intention of never
returning back to Australia. Also. Mr. Jackson had an intention to call his family to
Bahrain but the house in which he was living was never with an intention to live forever.
Thus, it can be said that there is no intention or purpose of presence in Australia.
Accordingly, Mr. Jackson cannot be considered as tax resident based on this parameter.
(b) Family and Business/Employment Ties: In the second criteria, one needs to look at the
family ties of an individual. In the present context, Mr. Jackson had family ties in
Australia and on the basis of the same he may be considered as tax resident of Australia.
However, Mr. Jackson had an intention to call his family to Bahrain by end of 2018.
Further, his family bond snapped in May 2018 while his wife and children continued to
stay in Australia with an intention of never coming back. Thus, on this parameter Mr.
Jackson may be considered a tax resident of Australia.
(c) Maintenance and Location of Asset: On this parameter, Mr. Jackson owns a house
property in Australia and is also on a contract basis of employment for 1 year. Further.
Mr.Jackson had rented an apartment in Bahrain and moved between two apartment

during his stay in Bahrain and never purchased a home. Further, Mr. Jackson has
purchased a motor vehicle in Bahrain. Also details regarding bank account, bills etc has
not been provided. Thus, on this parameter one cannot reach an effective conclusion of
his residency. However, considering the house in Australia and being used for abode
purpose it can be said that Mr. Jackson is a tax resident of Australia.
(d) Social and Living Arrangements: Since no detail has been provided on this context. It
shall be difficult to comment on the same. However, since Mr. Jackson family is staying
in Australia and his children are getting their schooling done in Australia, it can be stated
that he is a tax resident of Australia. (Australian Taxation Office, 2018)
Further, Mr. Jackson fails to satisfy the 183 day test which states that for considering a
person as resident of Australia he must stay in Australia for a period equal to or greater
than 183 days in a tax year. Since, in the present case the stay was less than 183 days he
cannot be considered as tax resident of Australia. (Australian Taxation Office, 2019)
Conclusion
Since, Mr.Jackson had an official home in Australia along with his wife and family
residing in Australia. Also, he made visit to Australia for short duration on account of his
family bonding in Australia. His action and intention does not go hand in hand. Further,
his intention of shifting family by the end of 2018 also did not materialise. Further, the
employment of Mr. Jackson was on a contract for 1 year and there is no sign of renewal
has been shown. Thus on the basis of above, it may be concluded that he is tax resident
of Australia as he is satisfying most of the criteria laid down under the Act which display
that his bond with Australia has not snapped and his action and words don’t go hand in
hand.
Hence, Mr. Jackson may carry out the follow activities;
(a) Apply to Australian Tax Office to exactly determine his tax residency;
(b) Comply with relevant tax laws of the country i.e. filing return and paying due taxes
on the same;
(c) Tax credit of the taxes paid in Bahrain.

References
Australian Taxation Office, 2018. Residency - the resides test. [Online]
Available at: https://www.ato.gov.au/individuals/international-tax-for-individuals/in-detail/
residency/residency---the-resides-test/
[Accessed 14 May 2019].
Australian Taxation Office, 2019. Work out your residency status for tax purposes. [Online]
Available at: https://www.ato.gov.au/Individuals/international-tax-for-individuals/work-out-your-
tax-residency/
[Accessed 14 May 2019].