Many mining professionals are considering going overseas for work given the downturn in mining and exploration activity in Australia.  Where you have a young family, this can be a time of difficult decisions as you might be prepared to live overseas, but your children may need to complete schooling in our high quality education system and your spouse may not want to move.

Overseas employment opportunities are often structured taking account of lower tax rates available in overseas countries and the last thing most people want is to receive another great big tax bill from Australian authorities on top of any taxes paid overseas.

Unfortunately, where you remain a resident of Australia for tax purposes you will be taxed on your worldwide income although you may receive a credit against Australian tax for the taxes you have paid overseas.

The question often arises as to whether you would become non-resident if you go overseas for a reasonably extended period, but your spouse and family stay behind in Australia?

In most circumstances it is highly unlikely particularly if you were born in Australia and intend that Australia continues to be your long term home country.

However, arguably there may be a circumstance arising where this question could be answered yes where there is a particular clause in the double tax agreement with the country that you go to work in.

For example, the double tax agreement with Singapore indicates that where an individual is a tax resident of both Singapore and Australia (under each country’s legislation) and they have a permanent home available to them in each country but they only have a “habitual abode” in Singapore and not Australia, then they would be deemed to be only a resident of Singapore.

The dictionary definitions of “habitual” and “abode” indicate that it is a dwelling that you occupy as a matter of habit.

It may be arguable that if you establish a home in Singapore and arrange for your family to visit you in Singapore in preference to you visiting them in Australia, that you would be considered to have a habitual abode in Singapore and not Australia and consequently this tie-breaker test might deem you to be a resident of Singapore and not Australia.

The Courts consider the Commentary on the OECD Model Tax Convention as authoritative guidance on the interpretation of double tax agreements.  This Commentary indicates the taxation authorities must consider the following when determining whether someone has an habitual abode in a country:

The comparison must cover a sufficient length of time for it to be possible to determine whether the residence in each of the two States is habitual and to determine the intervals at which the stays take place.

However, it is possible to have a habitual abode as well as a permanent home in both countries.

Great care must be taken with these matters and you should always seek expert taxation advice in relation to your individual circumstances.  The Tax Office may take a contrary view and you can gain greater certainty by making application for a Private Binding Ruling.

If you are planning to go overseas, we suggest that you see your tax adviser or alternatively ask to be referred to a specialist in this area prior to departing so you know in advance what the tax bill will be.

OECD Commentaries on the Articles of the Model Tax Convention, p88, para 19.

Singapore Agreement, Article 3(2)(a)

Andrew and Tony Lovett

11 December 2014

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