Residency - Application of DTA tie-breaker provisions

The Administrative Appeals Tribunal in Tan v Commissioner of Taxation affirmed the Commissioner's decision that the taxpayer was a tax resident of Australia for the whole income year, and as such, his Malaysian sourced personal services income and business income were taxable in Australia.

Since the taxpayer was resident of Australia and Malaysia under the relevant domestic laws, the Tribunal considered the application of the tiebreaker test in Article 4(2) of the AustraliaMalaysia Double Tax Agreement (DTA). It was determined that the arrangements the taxpayer had with relatives in Australia and Malaysia provided him access to accommodation which was sufficient to establish that he had a permanent home in both countries.

As it was also determined that he had a habitual abode in both countries, the outcome of the case depended upon whether the taxpayer's 'personal and economic relations' were closer with Australia or Malaysia. Although the Tribunal acknowledged that the taxpayer had some connection with Malaysia, on balance, it considered that the taxpayer's “personal and economic relations” were far closer in Australia than in Malaysia, and accordingly he was resident solely of Australia.