By Mayur Nayak, Tarunkumar G. Singhal, Anil D. Doshi, Chartered Accountants
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The Australian Taxation Office released Interpretative Decision ATO ID 2012/93 that deals with a definition of a “permanent home available to the taxpayer” in the residence tie-breaker article of the Australia – Malaysia DTAA.
The taxpayer, after living in his own house in Australia, contracts to work in Malaysia for two years. The taxpayer anticipates that after two years, he will return to Australia and leases his house for a fixed term of two years. The taxpayer is a tax resident in both countries and therefore article 2.a of the Treaty will determine the residence of the taxpayer by reference to the country in which the taxpayer has a permanent home available to him. The question is therefore whether a permanent home that the taxpayer owns in Australia, but leases while he is away in Malaysia, continues to be a permanent home available to him.
The Interpretative Decision focuses on “available” and finds, through article 3.3, that the Oxford dictionary defines “available” as “capable of being used” and since the home is temporarily rented, it is not capable of being used by the taxpayer, in a sense that he cannot occupy it. It follows that the home is not available to him for the term of the lease agreement.
The Interpretative Decision also finds that the home would not be “permanent” under the OECD Commentaries, as the taxpayer has not “arranged to have the home available to him at all times continuously” (paragraph 13 of the Commentary on article 4).
It could perhaps be noted that the full sentence in the Commentaries says “… continuously, and not occasionally for the purpose of stay which is of short duration”.
