Drawing the line – Recent case law on Australian tax residency

Three recent Administrative Review Tribunal (ART) decisions shows that tax residency remains a material and relevant focus area.

• Quy and Commissioner of Taxation [2025] ARTA 174 – initial taxpayer success for a refund of PAYG, however the Commissioner ultimately succeeded, and the taxpayer was found to be an Australian tax-resident ($524,943).
• Kirtlan and Commissioner of Taxation [2025] ARTA 539 – Commissioner unsuccessfully argued fraud or evasion to extend the period of review and tax substantial foreign income from 10 years ago ($3.7 million plus $1.9 million in penalties).
• Abotomey and Commissioner of Taxation (Taxation and business) [2025] ARTA 719 – taxpayer successfully argued that he was not an Australian tax-resident for one of two years.

As an Australian tax-resident, your global income is subject to Australian tax. These decisions highlight the complexities associated with the determination of Australian tax residency, particularly for individuals with overseas business interests and changing residences.

Common themes of the cases are:

• The taxpayer had significant income that would not be subject to Australian tax on the basis that they were not a tax resident.
• The taxpayer was in and out of Australia but retained ties to Australia e.g. spouse and children in Australia, property in Australia etc.
• All received tax agent advice.

This article explores the Kirtlan and Abotomey cases in more detail.

Applying evasion to tax residency – Kirtlan and Commissioner of Taxation 2025

Background

• Mr Kirtlan was an experienced businessman with a history in corporate advisory and capital raising services.
• The case related to Mr Kirtlan's income tax returns for the 2006-2008 income years.
• He lodged his Australian income tax returns on the basis that he was not a resident of Australia, and his UK returns on the basis that he was not a resident of the UK.
• As a result, significant income earned by Mr Kirtlan in the UK was not accounted for in either country.
• In 2018 (ten years after the relevant assessment period), the ATO relied on a finding of evasion and issued amended assessments, outside the usual two-year amendment period for an individual, totalling almost $3.8 million in tax for the 2006-2008 period, and an additional $1.9 million in administrative penalties (50% for recklessness).

Key issue – Evasion requires a blameworthy act

As the assessments were issued outside the usual amendment period, the key issue was whether evasion had occurred. Citing Denver Chemical Manufacturing Co¹, the Tribunal reiterated that evasion means more than to avoid, withhold information or provide misleading information. It must involve a blameworthy act or omission. As applied to this case, intentionally omitting income without a credible explanation would constitute evasion.

Tribunal findings – The impact of quality tax advice

Mr Kirtlan presented several objective factors to disprove claims that he was an Australian resident at the time, including clear intention (supported by correspondence) to leave Australia in 2005 and live permanently in the UK.

In contrast, the Commissioner suggested a continued connection to Australia, drawing attention to Kirtlan's frequent visits to Australia (over half of the relevant three-year period was spent in Australia) and retention of the Australian family home.

However, determining Kirtlan's Australian tax residency wasn't the objective (if it was, it would have been a difficult hurdle for Kirtlan to overcome). Instead, the main question was: had tax evasion actually occurred?

Regarding this, the Tribunal gave particular weight to the evidence provided by Kirtlan's long-time accountant and friend, Mr Spence. Spence testified to his personal knowledge of Kirtlan's business activities and living situation during the relevant period, including Kirtlan's intention to move his family to the UK permanently.

In 2005, Spence advised Kirtlan that he would not be considered an Australian resident for tax purposes and either prepared or approved Kirtlan's Australian tax returns on this basis. The Tribunal determined that Mr Spence, based on the depth of his professional relationship and frequent contact with Mr Kirtlan, had sufficient knowledge to offer credible and reliable tax residency advice.

Lesson – Professional advice can be the decisive factor

While the Tribunal concluded that the tax returns may have been inaccurate, it ultimately found that Kirtlan's reliance on the credible, informed and properly documented professional advice of his accountant provided a reasonable explanation for filing his tax returns on the basis he was not an Australian resident during the relevant three-year period.

Ceasing/re-establishing tax residency – Intention is crucial – Abotomey v FCT 2025

Background

• Mr Abotomey was as a director and the CEO of OnCard, an ASX-listed company, who worked and lived in China between late 2009 and early 2015 because of significant business interests over there.
• During this time, his wife and children lived in Australia in a home solely owned by his wife as of 2010 (previously jointly owned).
• These business interests were sold in late 2014, and as a result, Abotomey's employment with OnCard concluded in January 2015. He left China on the 1^st of February 2015.
• The ATO commenced a review in August 2016, focusing on Abotomey's 2014 tax return, which he lodged on the basis he was a non-resident, and his 2015 tax return, which he lodged on the basis he became an Australian tax-resident when he returned to Australia in February 2015.
• The ATO tried to extend the audit to FY2010 (the entire time he was in China) on the basis of evasion, however this position was withdrawn before the ART hearing.

Key issue

The main issue raised was whether the applicant was a resident of Australia for taxation purposes in either or both of the 2014 or 2015 financial years. For FY2014, the ATO's argument applied both the ordinary concepts and domicile test, however for FY2015, they expanded their argument by making the '183-day test' relevant.

Tribunal findings

For FY2014, the ART concluded Mr Abotomey was not a tax resident of Australia. He did not satisfy the ordinary concepts test due to several factors including the removal of personal belongings from Australia, removal from the electoral roll and no ownership of property or a car in Australia. He also failed to satisfy the domicile test. Despite having a place of abode in both countries, the tribunal determined the apartment in China provided by OnCard for his use was his permanent place of abode in FY2014.

However, Mr Abotomey was held to be an Australian tax-resident for FY2015. Several factors indicated to Abotomey that his employment with OnCard was coming to an end, including a change to Abotomey's employment contract in mid-2014, consistent with a transitory role for the sale of the business, as well as OnCard giving the landlord notice that Abotomey's apartment lease would end in February 2015. Hence, there was a clear intention for Abotomey to return to Australia, because without his OnCard contract and lease, he would be forced to legally reside in a country based on his residency i.e. Australia.

As a result, the ART determined Abotomey's tax residency change began at the start of FY2015, when he knew he was going to cease living in the apartment, and not in February 2015 when he actually moved back to Australia.

Implications for future decisions – Intention vs physical change

The analysis undertaken by the ART in this case varied from the tribunal's typical approach in determining tax residency i.e. that residency changes occur when an individual physically changes where they live. By instead placing emphasis on when a taxpayer forms an intention to take up Australian tax residency, this case raises several questions and concerns for future determinations, increasing the risk of exposure to adjustments and penalties for taxpayers and tax agents.

Need guidance on tax residency or potential evasion issues?

If you or your client is dealing with uncertainty around residency status or past income disclosures, we can help. Our taxation team regularly advises on complex tax matters and can guide you through the process with practical, expert support.

Footnote

¹ Denver Chemical Manufacturing Co v Commission of Taxation (NSW) (1949) 9 ATD 60 at 64;

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.