Private ruling: residency status
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you an Australian resident for taxation purposes? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: Residency status is a question of fact. The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 6(1) of the ITAA 1936 provides four tests to determine whether a person is a resident of Australia for income tax purposes. These tests are: • the resides test; • the domicile and permanent place of abode test; • the 183 day test; and • the Commonwealth superannuation fund test. The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests. The resides test The Macquarie Dictionary defines reside as to dwell permanently or for a considerable time, have ones abode for a time. The Shorter Oxford English Dictionary defines reside as to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place. The period of physical presence in Australia is not by itself decisive when determining whether an individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant in determining the residency status. No single factor is necessarily decisive. The quality and character of an individual's behaviour while in Australia assist in determining whether a person resides in Australia. In particular the following factors are useful when determining whether a person is residing in Australia: • intention or purpose of presence, • family and/or employment ties, • maintenance and location of assets, and • social and living arrangements. The resides test was considered in Iyengar v. FCT 2011 ATC 10-222 ( Iyengar's case) . In that case, the taxpayer was considered to be residing in Australia even though he had a two year work contract to work overseas and only returned to Australia twice in that time. He was in Australia for a period of 14 days and then later for a period of 10 days during that time. It was highlighted that the term 'reside' should be given a wide meaning and that a person does not necessarily cease to be a resident because they are physically absent. The test is whether the person has retained a continuity of association with that place. Iyengar had the required continuity of association with Australia and was considered a resident under the resides test. It was also considered that he did not establish a permanent place of abode outside Australia. In Pillay v. FC of T 2013 ATC 10-324 ( Pillay's case ), the taxpayer had purchased and renovated a place in Bali, Indonesia, however he was still found to be an Australian resident. He had been working overseas since 2006. He was in Australia for between six to eight weeks each year. During his visits to Australia, he would spend time at his property in Australia and visiting his children and grandchild. The taxpayer had Australian bank accounts. The taxpayer maintained a continuity of association with Australia in the relevant years despite being physically absent for significant periods. Also in Case 8/2013 2013 ATC 1-057, the AAT found that the taxpayer who was only in Australia for 47 days in one year and 117 days in the following year was nevertheless a resident of Australia for tax purposes. The AAT said that the taxpayer had retained a continuity of association with Australia as well as an attitude that Australia continued to be his home, as evidenced by his incoming and outgoing passenger cards. Recent case law considers the following factors relevant in determining the residency status of an individual. Physical presence The period of physical presence or length of time in Australia is not by itself decisive when determining whether an individual resides here. Equally important is the quality and character of an individual's behaviour while in Australia. In your case, you are currently working in country A. You returned to Australia several times in the 2013-14 financial year to visit family and friends. You spent approximately 100 days in Australia during these visits. Nationality You were born in Australia and are a citizen of Australia. You currently have a two year working visa for country A. The visa is a temporary stay permit. You intend to renew your visa with your employer's support before your current visa expires. You are unable to become a permanent resident of country A until you have had continuous employment for seven years. History of residence and movements You were living and working in Australia with your spouse prior to departing Australia. You now have a permanent employment position in country A. Habits and mode of life You have been living and working in country A. When you return to Australia you visit family and friends. When you are in country A you stay in shared rented accommodation. Social and living arrangements You spend most of your time in country A and have social ties there. You play sport in country A and go to the gym. You are not a member of any Australian sporting or social club. You have removed your name from the Australian electoral role. You have household items in both Australia and country A. Family and business ties Family or business ties with a country are an important factor to be taken into account in determining whether or not a person has ceased to be resident in a particular country. The location of an individual's immediate family can be decisive ( Joachim v. FCT 2002 ATC 2088). In Australia, family ties outweigh business ties where the two are in conflict ( Shand v. FC of T 2003 ATC 2080 ( Shand's case)). You have an apartment, mortgage offset account, superfund and household items in Australia. You have family and friends in Australia. Your spouse lived with you in country A for approximately three months in the 2013-14 financial year. You have no other family members in country A. You have suspended your Australian private health fund. Maintenance of place of abode You previously lived in rented accommodation in Australia. You have now purchased a property in Australia which is where your spouse is living. You have shared rental accommodation in country A. Results of the resides test You have been living and working in country A. Although you have only been in Australia for approximately 100 days in the 2013-14, this does not mean that you are no longer a resident of Australia. The period of time in Australia is only one relevant factor to consider. The fact that you are an Australian citizen and it is not practical to renounce your citizenship is also not a determining factor. You rent a property in country A and you intend to purchase property in country A as soon as possible. As highlighted in Murray v. FC of T [2012] AATA 557, the fact that the taxpayer had acquired a residential property overseas was not considered sufficient to establish that they were no longer a resident of Australia. We acknowledge that you purchased your Australian apartment as part of your financial goals and that owning a property in Australia is not a determining factor. Similarly to Pillay's case and Shand's case , the main factor for leaving Australia was your employment. Your work visa is for two years. It is a temporary stay permit and does not allow you to stay permanently in Hong Kong. Although your intention is not to return to Australia as found in Iyengar's case, it remains that your spouse is in Australia and you have family and financial ties in Australia. You refer to Mayhew v. Commissioner of Taxation [2013] AATA 130. In this case, the taxpayer's did not live in their Australian property or intend to live in it again. However your situation differs to this, as your spouse is currently living in your property. It is acknowledged that you only purchased the apartment in May 2014, however, the purchase of this property increases and not decreases your ties in Australia. It is also acknowledged that Mrs Mayhew did not join her husband immediately overseas. However after leaving Australia, she did not return to Australia to work as in your spouse's case. Therefore the decision in Mayhew's case cannot be applied to your situation. In your case, after reviewing your full circumstances, it is considered that you still have ongoing ties with Australia. You returned to Australia several times during the 2013-14 financial year to visit family and friends. Although your spouse spent some time in country A with you, your spouse is currently living and working in Australia. You also have a property and mortgage account as well as superannuation funds in Australia. It remains that you still have family and economic ties with Australia. In view of the decisions arising from recent case law, the Commissioner believes that you remain a resident of Australia for taxation purposes because you have maintained a continuity of association with Australia. Although you will not be physically present for much of the time and have full time employment in country A, it is considered that you are a resident of Australia under the resides test. The domicile test and permanent place of abode Whilst is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test. If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person has only one domicile at the one time. A person retains the domicile of origin unless and until they acquire a domicile of choice in another country. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country, for example, through having obtained a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice. You were born in Australia and are a citizen here. Your domicile of origin is in Australia. Although you intend to live and work in country A, you do not have a permanent or long term visa to stay there. It is not considered that your domicile is in country A. As your domicile remains in Australia, you will be considered an Australian resident unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia to live overseas ceases to be an Australian resident during the absence. IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode: • the intended and actual length of stay in the overseas country • any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country • the establishment of a home outside Australia • the abandonment of any residence or place of abode in Australia • the duration and continuity of presence in the overseas country, and • the durability of association with a particular place in Australia. As highlighted in paragraph 25 of IT 2650, as a broad rule of thumb, a period of about two years or more would generally be regarded as a substantial period for the purposes of a taxpayer's stay in another country. It must be stressed, however, that the duration of the taxpayer's actual or intended stay out of Australia is not, of itself, conclusive and needs to be considered with all of the factors. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. The nature and quality of use which a taxpayer makes of a particular place of abode overseas is important ( FC of T v. Applegate 79 ATC 4307; (1979) 9 ATR 899 ( Applegate's case) ). The expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives. The absence in Applegate's case was to be for an indefinite period and expected to be of a substantial length. However, more important is the durability of association with a particular place. Permanent place of abode connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has their usual place of abode there. Applegate did not have a property in Australia. Unlike Applegate's case, you have a spouse as well as a mortgage and property in Australia. Applegate had only a life policy and hospital fund membership remaining in Australia. While your usual place of abode may be currently in country A, it is not considered that country A is your permanent place of abode. Your visa remains valid for only two years. Although it can be renewed if you are working and meet the other visa requirements, it remains that you do not have a long term stay visa for country A. As highlighted in Applegate's case , a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. In Case 12,551 (1998) 37 ATR 1263, it was highlighted that a mere long absence is not enough to divest oneself of resident status. The taxpayer had retained Australian investments and bank accounts. Although it is your intention to live in country A with your spouse and you have a two year rental agreement and bank accounts in country A, it is not considered that you have established a permanent place of abode outside Australia. This is supported by the following: • your visa for country A is not permanent, • you have family and friends in Australia, • your spouse has returned to Australia to work, • you do not have other family in country A, • you have shared rental accommodation in country A, • you have an Australian property and mortgage, • you have returned several times to Australia, • your actions are not consistent with a person who has resolved to permanently leave Australia, and • your ties and association with country A lack an enduring relationship due to your visa restrictions. It is acknowledged that you can renew your country A visa and have employment in country A. However, the nature and quality of your ties in country A are not sufficient to show you have a permanent place of abode there. The fact that you have removed yourself from the electoral roll and have household items in country A is not sufficient to establish a permanent place of abode in country A. You also have household items in Australia. As your domicile remains in Australia and the Commissioner is not satisfied that you have a permanent place of abode outside of Australia, you are considered to be a resident of Australia for income tax purposes under the domicile test. The 183 day test and the superannuation test are not relevant in your circumstances. As you are an Australian resident for taxation purposes, your Australian and overseas income is included in your assessable income in the year of receipt under subsection 6-5(2) of the ITAA 1997.

Relevant facts: You were born in Australia. You are a citizen of Australia. | You have not been granted permanent residency of any other country. | You are a permanent full time employee in country A. | You do not have an employment position in Australia. | You have a work visa which allows you to be in country A for the duration of your employment. The visa does not allow you to remain permanently in country A. | Your work visa is valid for two years and is renewed/supported by your employer. | You have an E-passport used to enter and exit country A. | Permanent residency status is available in country A after seven years of continuous employment. You hope to become a permanent resident of country A after seven years. | You do not intend on returning to Australia to live and work. | Your spouse joined you in country A after approximately five weeks. Your spouse took leave from her Australian employment and was hoping to find work in country A. No work was found and due to various financial pressures, your spouse returned to Australia to work after several months. | Your spouse is intending to join you and work in country A and returns regularly to country A. | Your spouse lived with family after returning. | You and your spouse purchased an apartment in Australia in mid 2014. Your spouse now lives in this property. You saw the opportunity to purchase the property as a prudent use of capital to support your ultimate plan of home ownership in country A. | Country A levies additional stamp duty for non-permanent residents on purchases of homes. You hope to purchase a property in country A as soon as possible. | You return to Australia on a regular basis to visit your family and friends. | You have returned several times since leaving and have spent approximately 100 days in Australia. | You live in shared rental accommodation in country A. Your rental lease is for two years with an option for renegotiation. Your household belongings were shipped to country A. | Before your departure to country A, you were living in rented accommodation. | You have the following assets in Australia: | • Apartment owned jointly with your spouse | • Share of household items | You have personal bank accounts and investment accounts in country A as well as a share of all household items. | You have advised the Australian electoral commission to remove your name from the roll. | You are not a member of any sporting or social clubs in Australia. | You have suspended your Australia private health insurance. You have private health cover through your employer in country A. | In country A you regularly play sport with work associates and neighbours. You also frequently use the gym. | Neither you, nor your spouse, are eligible to contribute to the relevant Commonwealth super funds.