Can I Be Resident Of Australia And Resident Of The UK At The Same Time?
Article 4 of the UK / Australia Double Tax Treaty is effectively the ‘tie breaker’ where the laws of both the UK and Australia deem an individual to be tax resident in both jurisdictions.An extract from Article 4 is as follows:
1. For the purposes of this Convention, a person is a resident of a Contracting State:
- In the case of the United Kingdom, if the person is a resident of the United Kingdom for the purposes of United Kingdom tax; and
- In the case of Australia, if the person is a resident of Australia for the purposes of Australian tax.
A Contracting State or a political subdivision or local authority of that State is also a resident of that State for the purposes of this Convention.
2. A person is not a resident of a Contracting State for the purposes of this Convention if that person is liable to tax in that State in respect only of income or gains from sources in that State.
The status of an individual who, by reason of the preceding provisions of this Article is a resident of both Contracting States, shall be determined as follows:
- That individual shall be deemed to be a resident only of the Contracting State in which a permanent home is available to that individual; but if a permanent home is available in both States, or in neither of them, that individual shall be deemed to be a resident only of the State with which the individual’s personal and economic relations are closer (centre of vital interests)
- If the Contracting State in which the centre of vital interests is situated cannot be determined, the individual shall be deemed to be a resident only of the State of which that individual is a national;
- If the individual is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement.
If your ‘permanent home’ was Australia and you were tax resident of both the UK and Australia under each country’s tax rules, the treaty would take effect to deem you to be tax resident of Australia and non-resident of the UK.
If you had homes in both Australia and the UK, then you would move to the next test of where your personal and economic relations are closer – known as your ‘centre of vital interests’.
If your centre of vital interests cannot be determined, then the next test (in paragraph (b)) is where you are a national.What if you had dual citizenship like so many Australian politicians seem to have!?Then you move to paragraph (c) and you would have to seek input from the HRMC and the ATO (being the relevant competent tax authorities for each country) and they would then adjudicate.
The bottom line is that you as the taxpayer should decide where you intend to become tax resident.Ideally, you should not put yourself in a situation where you have to apply to the Australian Tax Office for a determination.If you have business interests in both the UK and Australia and you are travelling between the two countries on a regular basis, you need to decide which country is your primary base and then structure your affairs so that you are tax resident of that country.
It should be noted that there is no such thing as ‘international tax’ in that there is no international tax authority collecting tax and handing it to one country or another.International tax is about assigning rights to tax to one country or another.Your starting point to determine whether you are required to pay tax in a country is to refer to the domestic tax law.If the tax laws of two countries apply to your situation, then you need to review the rules of the relevant tax treaty (if one exists) to determine which country has the primary taxing rights.