The facts of the case are summarised as follows:
- Ms Addy was a British citizen who lived in Australia under a Subclass 417 (Working Holiday) visa from 20 August 2015 to 1 May 2017, apart from a two-month period in early 2016 that she spent touring South-East Asia.
- Prior to moving to Australia (on 20 August 2015), she had lived all her life with her parents in their family home in the United Kingdom (‘UK’), and she returned to the family home upon leaving Australia (on 1 May 2017).
- Ms Addy’s incoming and outgoing passenger cards indicated that she was a visitor or temporary resident entering Australia, with the UK (specifically England) nominated as her country of residence. Upon entering Australia, she purchased a pre-paid mobile phone account in Australia (having closed her UK account),
- For most of her time in Australia, Ms Addy lived with her friend in share house accommodation in Sydney, sleeping on separate mattresses in the same bedroom. In return, Ms Addy made a contribution towards her friend’s rent, utilities and the cost of additional furniture. In addition, Ms Addy also shared in various household domestic tasks with the other housemates.
The house was the base of Ms Addy’s social life, and she also used it as her postal address for various purposes (including Medicare and banking).
- Apart from Sydney, Ms Addy also lived and worked in a horse farm in Western Australia from April to June 2016 for the purpose of extending her working holiday visa. She also made brief interstate visits to Cairns, Brisbane and the Central Coast. On each of these occasions, she left from and returned to the share house accommodation in Sydney.
- In the 2017 income year, Ms Addy worked as a waitress in a number of establishments in Sydney. She was initially assessed by the ATO as a non-resident WHM, with the WHM tax rates applying to her waitressing income earned from 1 January 2017.
- Following an objection, the ATO acknowledged Ms Addy to be a resident (albeit still a WHM) from 1 July 2016 to 1 May 2017, and amended her assessment accordingly. Ms Addy was permitted to claim a part-year tax-free threshold for income earned prior to 1 January 2017, with WHM tax rates applying to income earned from this date.
- A second objection was lodged against the ATO’s amended assessment, as Ms Addy believed the ATO had incorrectly applied WHM tax rates to her income, given the wording of the ‘non- discrimination clause’ in Article 25(1) of the Australia-UK DTA. In other words, she believed the resident tax rates (including the tax-free threshold) should have applied to all of her income (including income earned from 1 January 2017).
- The ATO disallowed her objection, leading to Ms Addy’s appeal of the objection decision at the Federal Court (as a test case), based on the following broad contentions:
- That she was a resident for the whole of the 2017 income year (under the ‘183-day test’), and was therefore not required to reduce her tax-free threshold entitlement to take into account her ceasing to be a resident (under its ordinary meaning) during the year.
- By virtue of Article 25(1) of the Australia-UK DTA (i.e., the non-discrimination clause), WHM tax rates should not have applied to her, as she should have been subject to the same rates of tax as those imposed on Australian nationals who were also residents.
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