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Dual residency case decided on DTA tie-breaker

4 min read

In Pike v FC of T, the Federal Court held that a taxpayer employed in Thailand was deemed to be a resident of Thailand because his personal and economic relations were closer to Thailand than Australia, applying the tie-breaker rule in the Australia/ Thailand DTA.

Mr Pike was born in 1972 in Southern Rhodesia, which later became Zimbabwe. His had a de facto wife who got employment in Brisbane in April 2005, as well as two sons. In February 2009, the family obtained Australian permanent residency and in August 2010, the taxpayer’s de facto wife and sons were granted Australian citizenship. The taxpayer continued to travel on a Zimbabwean passport but eventually applied for and was granted Australian citizenship in October 2013, and obtained an Australian passport in 2014.

The taxpayer could not find employment in Australia so in March 2006, he took up a position in Thailand for an indefinite duration, obtaining a Thai work visa. He opened a bank account in Thailand where his salary was paid and from 2006 to 2014 he lived in rented accommodation in Thailand which he furnished and used to accommodate his family on visits. He regarded Thailand as his home, joined and actively attended golf, rugby and cricket clubs and formed enduring friendships there. He also lodged his tax returns in Thailand and did not lodge income tax returns in Australia at all, except for the 2014 income year.

During this period, the couple also jointly rented a number of unfurnished apartments in Brisbane, which they furnished as required and purchased a car for their use in Australia. As the wife had employment in Brisbane and the sons were in school in Brisbane, the wife was not prepared to move to Thailand.

In September 2010, the taxpayer and his de facto wife purchased vacant land in Queensland with the intention of building a family home. This land was sold in November 2013. The taxpayer supported the wife and their sons by regular financial contributions. They had a joint account with an Australian bank and Mr Pike also obtained a credit card with an Australian bank. The taxpayer enrolled on the electoral roll for the electorate where his home was located.

In 2014, the taxpayer moved to Tanzania for work and then in 2016, he moved again to took Dubai to take up a new position. His family remained in Brisbane throughout.

The Commissioner assessed the taxpayer as Australian resident for the 2009 to 2016 income years. The taxpayer objected, arguing he was not a resident of Australia but of Thailand, Tanzania and UAE, as relevant. When his objection was disallowed, he appealed to the Federal Court.

The Commissioner conceded that that the taxpayer was also a resident of Thailand for the 2009 to 2014 income years so the Court also needed to consider the effect of Art 4 of the DTA if the taxpayer was a resident of both countries during that period. The tie-breaker rule in Art 4(3) of the DTA would determine which country was entitled to tax the taxpayer for the income he earned in Thailand during that period.

The court agreed that, based on the taxpayer’s circumstances, he was resident of Australia under ordinary concepts.

As he was a dual resident, the court applied the tie-breaker rule in the DTA and found that between 2009 and 2014 the taxpayer’s personal and economic relations were closer to Thailand than Australia. The effect of the tie breaker clause was that the taxpayer was deemed to be a resident of Thailand only. The court said the taxpayer’s employment in Thailand supported his life and lifestyle, and his family in Australia. The taxpayer was never employed in Australia, and his journeys to Australia were for personal reasons only.

As such, in respect of these years, the Commissioner was not entitled to assess the taxpayer on his Thai employment income. The countries he lived in after he left Thailand did not have similar DTAs and therefore as a resident of Australia for those periods, the assessments of income for the 2015 and 2016 years were upheld.

The Commissioner has appealed against the judgement.


Image by Patty Jansen from Pixabay

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