The Administrative Review Tribunal’s (AAT’s) recent decision in Quy and Commissioner of Taxation [2025] ARTA 174 provides valuable guidance on the complexities of Australian tax residency, especially for individuals undertaking international work assignments who are seeking to be considered non-resident for Australian tax purposes.

Background

Trong Jeremy Quy, an Australian citizen employed by multinational engineering firm CBI Constructors (CBI), was predominantly based in Dubai during the period from 2016 to 2020. Central to the case was determining Quy’s Australian tax residency status during these years, given that substantial Australian Pay As You Go (PAYG) withholding tax had initially been withheld from his salary.

Quy’s employer, CBI, initially treated him as an Australian resident for tax purposes, withholding PAYG taxes as required under Australia’s PAYG system and remitting this to the Australian Taxation Office (ATO). Quy initially lodged his Australian tax returns on the basis that he was an Australian resident taxpayer. However, following subsequent professional advice suggesting otherwise, Quy lodged formal objections to his income tax assessments for the relevant years, seeking refunds of the PAYG taxes withheld.

Time spent between Dubai and Australia

Based on the detail presented in this case, between the years 2016 and 2020, Quy spent the majority of his time abroad:

• 2016 – Approximately 320 days overseas, with short visits to Australia (less than 50 days).
• 2017 – Only 47 days spent in Australia, with approximately 318 days in Dubai.
• 2018-2020 – Consistently fewer than 60 days spent annually in Australia, clearly illustrating an extended presence overseas.

Quy returned to Australia approximately 12 times during these five years, with visits lasting between 5 and 35 days, aligning primarily with holiday and family visits rather than residency.

Quy’s spouse remained in Australia for a substantial majority of this period, reinforcing the complexity surrounding Quy’s residency determination. She resided predominantly in the family home in Perth, supporting their daughters’ education and maintaining family and social connections in Australia.

Tests for Individual Tax Residency

The AAT considered two primary residency tests under Australian tax law:

1. Ordinary Concepts Test – Evaluates everyday activities, intentions, family relationships, and ties to Australia. Influential cases cited by the AAT included:

• Commissioner of Taxation v Miller (1946) 73 CLR 93
• Harding v Commissioner of Taxation [2019] FCAFC 29
• Cheung v Commissioner of Taxation [2024], which critically clarified distinctions between income and gifts in residency-related financial assessments.
• Domicile Test – Under section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936), individuals domiciled in Australia are considered residents unless they have established a permanent place of abode abroad, as explored in:

• FCT v Applegate (1979) 9 ATR 899
• Harding v Commissioner of Taxation [2019] FCAFC 29

Relevant Taxation Rulings guiding the Tribunal’s reasoning for their decision included:

Income Tax Ruling IT 2650: Considers criteria for establishing a permanent place of abode outside Australia.

Taxation Ruling TR 2023/1: Provides detailed insights into residency tests for individuals.

Key Arguments and Tribunal’s Conclusions

ATO’s Arguments

The Commissioner of Taxation highlighted the strong continuing connections Quy had with Australia throughout the period, noting specifically:

• Quy’s spouse and daughters’ continuous residence in Perth.
• Ongoing ownership and financial management of multiple properties in Australia.
• Regular payments to Australian bank accounts and employer contributions to Australian superannuation.
• Continuous coverage of Australian private health insurance.
• Frequent short visits back to Australia, suggesting ongoing residency ties.

Taxpayer’s Arguments

Quy presented evidence supporting non-resident status, illustrating:

Continuous residency was held in Dubai, evidenced by long-term leased accommodation, local assets (such as a car and bank accounts), and substantial social integration.

Clear physical and social presence in Dubai throughout the period.

Australian properties maintained primarily to support his daughters’ educational and welfare needs, not indicating personal residency intent.

Consistent official documentation (Passenger Cards) affirming his intention to reside outside Australia.

Earlier Tribunal Decision

Initially, the Tribunal supported the Commissioner’s stance. Quy appealed successfully to the Federal Court, which identified errors in applying domicile-related considerations to the ordinary concepts test. The case was subsequently remitted to the Administrative Review Tribunal for reconsideration.

Tribunal Decision and Reasoning

After careful reconsideration, the Tribunal concluded:

• Quy was not a resident of Australia under the ordinary concepts test, aligning with precedents in Harding and Levene, due to his limited physical and social connections in Australia.
• However, under the domicile test, Quy was deemed to have remained an Australian tax resident. The Tribunal concluded that Quy did not sufficiently demonstrate Dubai as his permanent place of abode. Influencing factors included employer-provided accommodation and visa arrangements reliant on continued employment, suggesting temporary residency rather than permanent establishment abroad. Effectively, Quy had not been able to demonstrate ceasing ties with Australia and establishing them in Dubai, meaning he has not been able to demonstrate a ceasing of Australian tax residency.

The Tribunal’s conclusion aligned with principles outlined in Taxation Rulings TR 2023/1 and IT 2650, affirming the significant weight given to substantial personal and family connections to Australia in residency assessments.

Practical Insights from this Decision

From this AAT decision, we highlight several practical observations for taxpayers and businesses to consider when looking at non-resident tax payer status:

• A ‘permanent place of abode’ overseas requires evidence beyond employment-driven temporary arrangements. Independent and durable personal ties abroad must be clearly established.
• Ongoing family and financial connections in Australia significantly influence residency decisions. Taxpayers are advised to maintain clear documentation that explains these connections relative to residency status.
• Accuracy and consistency in official documents, such as Passenger Cards, greatly impact residency assessments. Aligning documented intentions with actual circumstances is crucial, For guidance on managing these requirements, refer to our guide on Navigating Tax Disclosure Requirements.

Practical Takeaway

This Tribunal decision underscores the complexity involved in determining tax residency for Australians working internationally. Clearly demonstrating intentions through well-documented, consistent, and transparent actions is essential for effectively navigating residency assessments.

Taxpayers who are undertaking international assignments should proactively manage and clearly document their circumstances to effectively address and mitigate residency-related risks, particularly when seeking to file returns in Australia as a non-resident taxpayer. For insights into recent legislative changes affecting cross-border tax obligations, refer to Treasury Laws Amendment: 2024 Tax Insights