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Sladen Snippet - Coelho v FCT – foreign nationals in Australia for more than 183 days not Australian tax residents

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An individual in Australia for more than 183 days for an income year, whether continuously or intermittently, is an Australian tax resident unless the Commissioner of Taxation is satisfied the individual’s usual place of abode is outside Australia and the individual does not intend to take up residence in Australia. Satisfying the Commissioner that the exclusion applies can be difficult.

The main difference between tax rates for residents and non-residents are that:

  1. residents pay 0% on the first $18,200 of taxable income and 19% from $18,201 to $37,000 while foreign residents pay tax at 32.5% on each dollar up to $37,000; and

  2. foreign residents are not liable for the Medicare Levy of 2%.

In Coelho v FCT [2020] AATA 2474 (Coelho), the Administrative Appeals Tribunal (AAT) held four foreign nationals on working-holiday visas that were in Australia for more than 183 days in the 2017 income tax year were non-residents. The Commissioner assessed the taxpayers as non-residents, the taxpayers unsuccessfully objected to those assessments, and then sought review by the AAT of the Commissioners’ decision.

The AAT considered that:

  1. each taxpayer being in Australia for more than 183 days is not determinative of whether their usual place of abode was inside Australia;

  2. an individual can be in Australia for more 183 days and still have their usual place of abode outside of Australia;

  3. a place of abode does not cease to be a usual place of abode just because the individual is not physically present at that place;

  4. ‘place of abode’ does not refer to an identified dwelling but the town or country where a person might ordinarily dwell (applying the “place of abode” test in Harding v FCT [2019] FCAFC 29 to the usual, as opposed to permanent, place);

  5. usual in this context stands in contrast to a place of abode that is casual or temporary; and

  6. the taxpayer bears the onus of proving on the balance of probabilities where their usual place of abode is.

The taxpayers could not discharge that onus of proof and the AAT upheld the Commissioner’s decision.

Coelho illustrates that, once again, residency cases are heavily dependent on the factual matrix of the taxpayer. If you require advice in relation to your tax residency or have any questions in relation to the Coelho case, please contact us:

Neil Brydges
Principal Lawyer | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E nbrydges@sladen.com.au

Lucy Liang
Graduate Lawyer
E lliang@sladen.com.au

James Gao