ATO ID 2012/93: Dual resident of Australia and Malaysia: permanent home available
Date of decision: 9 November 2012
Year of income: Year ended 30 June 2010
Business line: Public Groups and International

Issue
Is a home in Australia owned by the taxpayer, a dual resident, a 'permanent home available to him' for the purposes of Article 4.2(a) of the Malaysian agreement ( Agreement between the Government of Australia and the Government of Malaysia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [1981] ATS 15) where the taxpayer entered into a two year fixed term lease agreement with another person in respect of that home while he worked in Malaysia?

Decision
No. The taxpayer's home in Australia is not 'available to him' for the purposes of Article 4.2(a) of the Malaysian agreement for the term of the lease agreement.

Facts
At all material times, the taxpayer owns a house in Western Australia. After living in that house and working in Australia, the taxpayer contracts with his employer to work in Malaysia for a period of two years. At that time, the taxpayer anticipates that he will return to live in Australia when his employment contract ends. Under Article 4.1 of the Malaysian agreement, the taxpayer is a resident of Australia and Malaysia for the purposes of Australian and Malaysian tax respectively (a 'dual resident') for the two year period the taxpayer works in Malaysia. Prior to travelling to Malaysia, the taxpayer leases his house in Australia to another person for a fixed term of two years ('the lease period'), the same period of time the taxpayer expects to be in Malaysia. The terms of the lease agreement are subject to the Residential Tenancy Act 1987 (WA). For the term of the lease agreement:

Reasons for decision
Summary: Article 4.2(a) of the Malaysian agreement provides that a dual resident shall be deemed to be a resident solely of the Contracting State in which he has a permanent home available to him. The term 'permanent home available to him' in Article 4.2(a) is not defined in the Malaysian agreement. Article 3.3 of the Malaysian agreement provides for present purposes that, in Australia applying the agreement, any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under Australian law. Neither the composite phrase 'permanent home available to him' nor any part of that phrase is, relevantly, defined in Australian law. The Australian Oxford Dictionary, 2004, rev. 2nd edn, Oxford University Press , defines available as "capable of being used; at one's disposal." In the present case, the taxpayer has a home in Australia and he continued to own that home while he was living and working overseas. From the above, the lease agreement does not contain any conditions that allow the taxpayer, as lessor, to terminate the agreement and force the tenant from the home without due notice or process under the Residential Tenancy Act 1987 (WA). Applying the ordinary meaning to the present case, the taxpayer is not able to occupy his home at any time during the lease period. In this sense, the taxpayer is not capable of using the home in this way nor, in the same sense, is it at the taxpayer's disposal. Accordingly, based on the rights of the lessee under the lease agreement and the RTA, the Commissioner considers that the taxpayer's home is not 'available to him' for the term of the lease agreement for the purposes of Article 4.2(a). This result is also consistent with the concept of the 'permanence' of the home set out in paragraphs 12 and 13 of the Commentary on Article 4 of the OECD Model which state: '12. Subparagraph a) means, therefore, that in the application of the Convention ...it is considered that the residence is that place where the individual owns or possesses a home; this home must be permanent, that is to say, the individual must have arranged and retained it for his permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be a short duration. 13. As regards the concept of home, it should be observed that any form of home may be taken into account (house or apartment belonging to or rented by the individual, rented furnished room). But the permanence of the house is essential; this means that the individual has arranged to have the dwelling available to him at all times continuously, and not occasionally for the purpose of a stay which, owing to the reasons for it, is necessarily of short duration (travel for pleasure, business travel, educational travel, attending a course at a school, etcetera.).' In the present case, the taxpayer's home does not satisfy the notion of permanence as described in paragraph 13 above in that, for the period of the lease agreement, the taxpayer has not 'arranged to have the dwelling available to him at all times continuously'. Therefore, the home is not 'available to him' for the term of the lease agreement for the purposes of Article 4.2(a) of the Malaysian agreement.

Legislative references: International Tax Agreements Amendment Act (No 1) 2011 Article 3.3 Article 4.1 Article 4.2(a)
Other references: Malaysia Agreement [1981] ATS 15 Australian Oxford Dictionary, 2004, rev. 2nd edn, Oxford University Press Commentary on Article 4 of the OECD Model Tax Convention on Income and on Capital as at 22 July 2010
Subject references: Double tax agreements Treaties Tax Treaties and other agreements Dual residence International tax Residence in Australia Residence of individuals Malaysia