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11 Mar 2015 Backpacker not resident of Australia under 183 day test – Re Koustrup

A backpacker of Danish origin who spent a total of 287 days in Australia during the income year ended 30 June 2013 has been found by the Administrative Appeals Tribunal not to have been a resident of Australia during that income year.

This was one of three similar cases heard together by the Tribunal. Because the fact patterns in the three cases differed materially, the Tribunal gave separate decisions. The applicable principles and the decisions in each case were, however, the same. The decisions were Re Koustrup, Re Jaczenko and Re Clemens.

In each case, unusually, it was the Commissioner who contended that the applicant was not a resident of Australia. This was because of the tax-free threshold that applies to a resident of Australia but which does not apply in the case of a foreign resident. The existence of the tax-free threshold in the context of a resident gives rise to a zero rate of tax applying to the first $18,200 of taxable income. This is to be contrasted with a rate of 32.5% which applies to the first $18,200 of taxable income, if the taxpayer is treated as a foreign resident.

In Re Koustrup, the applicant entered Australia under a “working holiday visa”. She described herself as a “visitor or temporary entrant” coming to Australia for the main reason of having a “holiday”. She further nominated that her intended length of stay in Australia would be eight months. The applicant had no plans to live in Australia; she was a “visitor”.

While in Australia, the applicant stayed and worked for short periods in various parts of Australia. After a total stay of 287 days she returned to Denmark.

On the facts, the Tribunal decided that the applicant had a usual place of abode at her mother's or father’s place in Denmark at all relevant times. The Tribunal was accordingly of the view that, for the year ended 30 June 2013, the applicant was not a resident of Australia.

The decisions in these three cases are interesting in particular for the Tribunal’s helpful synthesis of principles relating to the question whether an individual is a resident of Australia. The Tribunal set out the following principles.

1. Although it is not clear from the statutory formulation (the definition of “resident or resident of Australia” in s 6(1) of the Income Tax Assessment Act 1936 (Cth)) it seems that the satisfaction of the Commissioner (and, on review, the Tribunal) must be during the relevant year of income.

2. The “usual place of abode” (which is part of the 183 day test) refers to the place where the person usually or customarily dwells. Thus, a person who lives at a place in Country X and travels to Australia for a seven month working holiday, while retaining a street address in Country X to which he or she always intends to return, would clearly have a usual place of abode in Country X.

3. It is possible to have no usual place of abode at all. This would arise in circumstances where a person is moving about with no fixed address which the person would retain as his or her usual place of dwelling. This type of person is rare and has been referred to as a so-called “bird of passage”.

4. It is not possible to have two or more usual places of abode at the same time. Where there are two competing places of abode it needs to be assessed, based on all the available facts, as to which one is “usual”.

5. It is, however, possible for there to be two different usual places of abode at different times. Thus, a person can have a usual place of abode in one location for half the tax year and because of changed circumstances that same person can have a different usual place of abode for the other half of the year.

6. While the Parliamentary intentions are not always relevant, it is worth noting that the various qualifications to the 183 day rule were enacted by Parliament “in order that there may be no danger of treating as residents persons who are purely visitors”: Explanatory Notes on Amendments contained in the Income Tax Assessment Bill 1930 to amend the Income Tax Assessment Act 1922-29, page 11. Thus, overseas visitors on holidays or working in Australia who are in Australia for more than 183 days would not be residents during their stay under this test, as they would usually have a usual place of abode elsewhere and would not have an intention of taking up residence in Australia.

Re Koustrup and FCT [2015] AATA 126 (Professor R Deutsch, Deputy President, 6 March 2015).

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