QUESTION 1

Simon Shipmate is an Australian citizen. He was born in Cairns, where he lived and worked all his life until 1 July 2021 when he left Australia. This question is about 2 income years, the 202122 and 202223 income years. Your answers should address these income years together. This is the backstory of how it came about that Simon left Australia:

According to Simon, his plan was to leave Australia permanently on 1 July 2021 as he wanted to travel the world! To fund his travel plans, Simon sough to find contract employment in low-tax countries. He thought the tax rate in Australia was way too high! His plan was to find contract employment in a job that involved significant travel. Working-while-seeing-the-world appealed to him. Because he qualified as a master marine engineer a few years back, his priority was to find a job in this industry. If he was able to secure employment on ocean going yachts, he would be paid to travel the world. As it happens, there is a severe skills shortage in the marine industry. Simon quickly had a few offers of employment on the table to choose from. One of these offers was very lucrative and he decided to accept it. It involved taking up a 2-year employment contract with an employer based in Dubai, a city-state in the United Arab Emirates (UAE) from 1 July 2021, to work on a fleet of luxury yachts. There is no double taxation agreement between Australia and the UAE. The UAE is a low-tax- country. Simon remained with this employer until 30 June 2023.

Simon did not lodge tax returns in Australia for the 202122 and 202223 income years, based on the following reasons:

• As a condition of his employment, Simons employer provided him with access to accommodation in a furnished two-bedroom apartment in Dubai, free of charge. He had access to this apartment for the two years that he was employed with this employer. No one else used the apartment during his absences from Dubai. He used the gym in the apartment building when he lived there and invited friends over for coffee a few times each year.

• Before he left Australia, he lived in a share-house in Cairns with no furniture or household items of his own to take with him to Dubai. He was not tied to Australia through any assets.

• He did not receive any federal government income support.

• He did not spend one day in Australia.

• He regarded Dubai as his home, and because of this, his assessment was that he is not a tax

  resident in Australia, but a tax resident of the UAE for these two years. The ATOs assessment was that Simon is a tax resident of Australia and that he had to lodge tax returns in Australia for the 202122 and 202223 to declare his salary that he earned from his Dubai- based employment in Australia for the following reasons:

• The apartment in Dubai does not belong to him, and it came furnished.

• Foreigners are not permitted to buy property in the UAE, which raises the question whether

  they can ever be tax resident in the UAE.

• Simon stated in correspondence with the ATO that he would not stay in the UAE after his two-

  year employment contract ends, but that he did not know where he would move to next and under which circumstances. What he was certain about, is that he would not return to Australia.

• He is an Australian citizen.

• He only spent 40 days in Dubai during the 202122 income year and 48 days during the

  202223 income year, as his work involved a lot of travel. While it is common for master marine engineers to spend a lot of time away from home, in Simons case, this was extraordinarily high as his employer has a fleet of luxury yachts in ports all over the world. When these yachts run into mechanical problems that only a master marine engineer such as Simon can solve, he is required to travel to those destinations.

You are required to:

1. Name the one test from the definition of resident in s 6(1) ITAA36 that Simon will rely on to prove that he is not tax resident in Australia.

2. Based on your answer to part a, prepare a detailed statement that Simon can use to support his case that he is not tax resident in Australia. Your answer must only focus on the test that you identified in part a. Your answers must reference relevant case law and/or ATO Rulings.

3. Think about your answer in part b. Why do you think Simon might be unsuccessful in using your argument? Write down at least one reason why the ATO might not accept this argument.