ARTA overturns ATO decision in tax residency case

Where someone is a resident under the domestic tax laws of both Singapore and Australia, the tax treaty between the two countries provides tie-breaker rules that determine which country the individual is treated as a resident of.

The tribunal needed to determine which country Bulie's personal and economic relations were closest to.

Between May 2019 and March 2023, the ATO issued a series of income tax assessments and Division 293 assessments in respect of Bulie's taxable employment income earned in Singapore for the income years ending 30 June 2018 through 30 June 2022 on the basis that Bulie was a tax resident of Australia.

The assessments were based on the relevant income tax returns lodged by Bulie.

Bulie lodged an objection to the assessments on 13 April 2024, contending that, under the treaty, he was to be treated as a tax resident of Singapore only during the relevant income years, meaning that his employment income was taxable only by Singapore.

The ATO then disallowed the obligation in full in December 2024 on the basis that Bulie was to be treated as a tax resident of only Australia under the treaty tie-breaker rules.

From January 2018 until the end of August 2022, Bulie lived in a leased residential property in Singapore. Since September 2022, he lived in another leased residential property in Singapore. Bulie's wife and youngest child have continued to live in the Sydney Home since 2013 

He spent 173 days physically present in Australia in 2018; 78 days in 2019; 189 days in 2020; 144 days in 2021; and 108 days in 2022. Overall, during these years, Bulie spent approximately 38 per cent of his time in Australia.

In its decision, the Tribunal noted that Bulie earned the bulk of his income during the relevant period from his employment in Singapore.

"As such, Singapore is the ‘centre of his day-to-day life and source of economic lifeline for himself and his family," said tribunal general member Micah Burch.

The tribunal also said that while Bulie owned a home in Sydney, it was not an income-producing asset during the relevant periods and therefore did not alter Bulie's "actual, recurring economic activity which was centred in Singapore".

It also gave little weight to Bulie's remaining economic ties to Australia, such as his maintaining private health cover, having Medicare access, and keeping bank accounts in Australia.

"This is a function of the administrative realities and conveniences of dual residency and does not have a significant bearing on the tie-breaker test in this case," said Burch.

The tribunal found that Bulie's economic and personal relations with Singapore were, in the composite, stronger than his economic and personal relations with Australia during the relevant period.

"During the Relevant Period, Mr Bulie spent the bulk of his time in Singapore and earned the bulk of his income in Singapore. Though his personal relations to Australia were stronger, he had meaningful personal relations in Singapore as well," Burch said.

"And though his ownership of assets in Australia was not insignificant, they did not produce income and paled in their significance when compared to the primacy of his income-earning activity in Singapore."

The tribunal therefore found that Bulie's strongest personal and economic relations during the relevant period, when considered holistically, were with Singapore and that he had successfully discharged his burden of proving that the assessments from the ATO were incorrect.

The tribunal set aside the decision on the objection and allowed Bulie's objection in full.