Signature Tax Agreement Made Easy

Signature tax agreement

good morning my name is Fletch Hyneman I'm a partner at Cooper great sward specializing in tax and tax disputes if you're an Australian expat living and working overseas one of the most important considerations with respect to your residency position is whether there is a double tax agreement between Australia and the country that you're living and working what we see is that the ATO is often taking a position that if somebody has connections with Australia they continue to reside in Australia and therefore continue to be a tax resident of Australia for Australian income tax purposes however often those clients will also be tax residents of the country that they're living and working overseas and if there is a double tax agreement between Australia and that country that double tax agreement then overrides the Australian domestic law to the extent that there's any inconsistency this can sometimes make it easier to help determine whether somebody is actually in Australian tax residence if they have the benefit of the protection of that double tax agreement the double tax agreements apply when a person is a tax resident of Australia but is also a tax resident of the country where they're living and working overseas now whether they are a tax resident of that country overseas depends on the domestic law in that country and that varies from case to case so you would need to check with a local tax advisor in that country to see whether you are a tax resident in that country it's really important to note that tax residency is a completely different test from your immigration status so we often see cases where clients may not have a permanent immigration status but they still qualify as a tax resident in the pursuit in that particular country similarly we also see situations where a client does have a permanent immigration status in that country but has failed to meet the criteria to be a tax resident of that country this is really important if you are not a tax resident of the country overseas then you won't get the protection of the double tax agreement so most of all tax agreements where Australia is a party contains what we call a residency article and what that article does is it says that if you are deemed to be an Australian tax resident under the Australian income tax law but you're also a tax residence under the income tax law of the country that you're living and working then the residency article contains these tiebreaker tests and basically the tiebreaker tests mean that you are only deemed to be a tax resident of one country and not both the first tiebreaker test is usually the permanent home test so it checks on whether you have a permanent home available to you in the overseas country and also whether you have a permanent home available to you in Australia it's really important to check the specific tiebreaker tests in each double tax agreement they are not the same for each country and they apply in a particular order so you need to make sure that you are checking the double tax agreement that applies to the country where you're living and working in any dispute with the ACA the taxpayer has the burden of proof so in the case of asserting that you're a tax resident of the overseas country you'll need to make sure that you have proof that you're actually a tax resident of that country sometimes this will come in the form of an advice from an advisor from that country sometimes it will be clear from the returns that you lodge in that country or the notices of assessment that you get in that country but whatever it is you need to make sure that you keep those records and this is particularly important because sometimes we find that clients don't keep the records for example if their company is just withholding tax on their behalf it's so important that you get records that confirm that you're a tax resident of that country in relation to the first tiebreaker test you need to establish that what you have overseas is your permanent home so you would need to keep evidence about leases for example the rights that you have to occupy the premises and make sure that qualifies as permanent in the context of the permanent home test most of the double tax agreements then contain a habitual abode test which generally tests which country you stay more often in and also a test that looks at where your personal or economic relations are closer finally some double tax agreements contain a test that just looks to a person's nationality but as we mentioned before it's really important to make sure that you look at the dca as the test supply in order so if your circumstances are resolved on the permanent home test you wouldn't be looking at any of the other tiebreaker tests thanks for watching if you have any questions please feel free to contact us we're always happy to help where we can