Private ruling: Residency
Published: August 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2010

Ruling: Questions and answers: | 1. Are you a resident of Australia for taxation purposes? | Yes. | 2. Are you a resident of Australia for the purposes of the tie breaker provisions of the Double Taxation Agreement between Australia and Country Y? | Yes.

Relevant facts and circumstances: You were born in overseas. You are a citizen of Australia. You came to Australia a number of years ago to live. You went to Country Y a few years ago. You went to Country Y to attend meetings and seminars for your personal growth and development with a spiritual teacher. You have a work visa for Country Y. You did not intend on leaving Australia on a permanent basis when you went to Country Y. Your spouse went to Country Y with you. You intend on returning to Australia to live permanently. Your adult children live in Australia. You are renting your home out to a friend while you are in Country Y. All your belongings are stored in the town you lived. You only took clothes and a few personal items overseas. You have a bank account in Australia and no other assets. You have a bank account in Country Y which your wage goes into. You are currently living with a friend in a rental property in Country Y. When you are not living with your friend in the rental property you are a live in care giver. You have returned to Australia x since leaving for Country Y. You intend on returning later this year. Your reasons for returning are to visit family and friends along with inspecting your property. You are considered by Country Y authorities to be a resident of Country Y for taxation purposes and you are being taxed on your world wide income in country Y. Neither you nor your spouse are currently or have ever been Commonwealth government employees.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1). | Income tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Subsection 995-1(1). | International Tax Agreements Act 1953 Sch4-Art4.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: · the resides test · the domicile test · the 183 day test · The superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia (IT 2650). 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides (ordinary concepts) test: The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: (i) Physical presence in Australia (ii) Nationality (iii) History of residence and movements (iv) Habits and "mode of life" (v) Frequency, regularity and duration of visits to Australia (vi) Purpose of visits to or absences from Australia (vii) Family and business ties to different countries (viii) Maintenance of Place of abode. These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling TR 98/ 17 Income tax: residency status of individuals entering Australia and IT 2650. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - (i) Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this, the AAT has stated that: Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home. You departed Australia a few years ago to travel to Country Y on a work visa. You intend to return to your family home in Australia to live with your spouse when your visa expires. You will return to Australia later this year to visit your family. Although you were not physically present in Australia for the period, you had a place in Australia that you intend to return to and that you consider your home. | Detailed Reasoning - (ii) Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. You are an Australian Citizen. | Detailed Reasoning - (iii) History of residence: You were born overseas and moved to Australia a number of years ago. You have lived in Australia for most of your life. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who You have gone to Country Y for spiritual teaching and seminars. You live with a friend in a rental property along with your spouse for part of the time and as a live in care giver for the rest of the time. You have a bank account in Country y. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia. You have made x trips back to Australia since leaving. You intend to return this year to visit family and friends. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You were absent from Australia for a period of time to work in Country Y. | Detailed Reasoning - (vii) Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: Your spouse accompanied you to Country Y and your children live in Australia. You intend to live back in Australia in your family home with your spouse. | Detailed Reasoning - Business or economic ties: You have lived and worked in Australia up until you left for Country Y. | Detailed Reasoning - Assets: · You have a bank account in Country Y. · You maintained your Australian bank account. · You took some personal items to Country Y. · The rest of your belongings are in storage in Australia | Detailed Reasoning - (viii) Maintenance of Place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You have a home in Australia which you are renting out to a friend. You will return to this home in Australia and live with your spouse. | Summary: As stated above, it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically; · You only intend to be in Country Y for the period of your visa. · You went to Country Y for spiritual teachings and seminars. · Although you have not physically been present in Australia for the period (except for x short visits back to Australia to visit your family) you have a place in Australia that you intend to return to and that you consider your home. Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period. | Detailed Reasoning - The domicile test: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. You are a citizen of Australia and you were born in Country Y. Therefore, your domicile of choice is Australia. 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. You have gone to Country Y on a work visa and you do not intend on living in Country Y on a permanent basis. Therefore, your domicile is still Australia. | Detailed Reasoning - Permanent place of abode: The expression 'place of abode' refers to a person's residence, where they live with their family and sleep 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. 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. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. You have not gone to Country Y on a permanent basis. You live with a friend in rented accommodation for part of the time, and are a live in care giver for the rest of the time. All your belongings, other than your day to day items, are in Australia and you have a home in Australia which is being rented by a friend while you are in Country Y. Based on these facts, the Commissioner is not satisfied that you have established a permanent place of abode in Country Y. Therefore, you are a resident of Australia under this test. As you are a resident of Australia for taxation purposes under the domicile test it is not necessary to look at the 183 day or the superannuation tests. | Detailed Reasoning - Your residency status: You are a resident of Australia for taxation purposes. | Detailed Reasoning - Double taxation agreement between Australia and Country Y: In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country Y Agreement (the agreement) is listed in section 5 of the Agreements Act. The agreement operates to avoid the double taxation of income received by residents of Australia and Country Y. In your case, you are a resident of both Australia and Country Y for tax purposes, according to each country's domestic law. Paragraph 3 of Article 4 of the agreement sets out the factors to be considered when determining a person's residence for the purpose of the agreement, where the person is a resident of both Australia and Country Y under domestic law. Where by reason of the provisions of paragraph 1 of Article 4 an individual is a resident of both Contracting States, then their status shall be determined in accordance with the following rules: (a) they shall be deemed to be a resident solely of the Contracting State in which he has a permanent home available to him; (b) if they have a permanent home available to them in both Contracting States, or if they do not have a permanent home available in either of them, they shall be deemed to be a resident solely of the Contracting State with which their personal and economic relations are the closer. You only have a permanent home available to you in Australia. You live with a friend in rented accommodation in Country Y for part of the time, and as a live in care giver for the rest of the time. Therefore for the purposes of the double tax agreement you are a resident of Australia for taxation purposes.