Private ruling: residency
Published: May 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: Income year 2013- 2014

Ruling: Question and answer | Are you a resident of Australia for taxation purposes from the date you depart Australia? | Yes.

Relevant facts and circumstances: Your country of origin is Australia. You are a citizen of Australia. You have accepted an employment contract from an overseas company, which required relocating to a foreign country. Your contract will be effective from a date until a date. It has been indicated to you that you would be able to extend the contract or enter into a new contract for further employment. You relocated to the foreign country on a date. Your spouse relocated to the foreign country to be with you from a date to a date, unless your employment contract is extended. The overseas company will obtain a business visa for you and a temporary visa for your spouse. Neither visa allows you to stay permanently in the foreign country. The visas are only valid for the length of your employment, but may be extended if the employment contract is extended. You and your spouse will remain resident in the foreign country for the term of your employment contract. You formed the intention of making your home outside Australia indefinitely on your acceptance of the contract. In Australia, you and your spouse resided at an address. This house will not be rented out as it is on the market to be sold. It is the only real property owned or controlled by you and your spouse. You have no intention of returning to Australia, unless for annual leave. Your only other assets in Australia are accounts held with the a bank: • a cheque account • a savings account • a credit card and • a mortgage account. Funds will be transmitted monthly to your accounts to cover mortgage repayments and necessary insurances and other bills. You also have a private superannuation account with a super fund. Personal vehicles in Australia will be placed in long term secure storage and household effects will follow on the sale of the house. Your asset overseas will be a bank account. You do not hold a return ticket to Australia. Your employer will be providing hotel accommodation only for the first period after arrival during which time you will seek a house to rent. The employer will provide a nominal housing allowance under the terms of the contract. The only income either will receive from Australia will be minimal bank account interest. You have supplied a copy of your employment contract. You do not have a position or job being held for them in Australia. No one else will accompany you to the foreign country; you do not have any family. The only social and sporting connections you have with Australia are personal. The only social and sporting connections you will have with the foreign country are those gained through the process of employment. Neither you nor your spouse has ever been a Commonwealth Government of Australia employee for superannuation purposes. Both you and your spouse are over 16. Depending on the ruling decision, you will advise Australian companies with whom you have investments that you are a foreign resident. Depending on the ruling decision, you will advise Medicare and your health insurer to have your name removed from their records. However, you may continue to pay for your private health insurance to retain your lifetime cover. When completing the outgoing passenger card you will put employment as your reason for going overseas. You have completed the Australian Electoral Commission's "Overseas notification form" (copy provided). On this form you have stated that your absence will be temporary and that you expect to be overseas from a date to a date.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: 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' and 'permanent place of abode' test; • the 183 day test; and • the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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 with Australia compared to the foreign country concerned; and (viii) maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35): Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): 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. As indicated in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 ( Iyengar's case ), there is usually a requirement that you be physically present in Australia for at least part of an income year to be considered a resident. In your case, you intend to work in the foreign country for a number of years and do not anticipate making return visits to Australia. Therefore, although you will not be physically present in Australia for the majority of each of the years you intend on working in the foreign country, this does not preclude you from being an Australian resident. The test is, whether you have retained, or will retain, a continuity of association with a place in Australia, together with an intention to return to that place. You relocated to the foreign country for business from the recent year to a certain subsequent year, unless your employment contract is extended. | Detailed Reasoning - (ii) Nationality: You are a citizen of Australia. | Detailed Reasoning - (iii) History of residence and movements: You lived in Australia prior to moving to the foreign country early in the recent year. You have a temporary visa which does not allow you to stay permanently in the foreign country. The visa is only valid for the length of your employment, but may be extended if the employment contract is extended. | Detailed Reasoning - (iv) Habits and 'mode of life': You have lived and worked in the foreign country since early in the recent year. Your presence in the foreign country will be dependent on the employer sponsored work residence permit that will enable you to live and work in the foreign country. Should your employment cease for any reason, you will be required to leave the country. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You have no intention of returning to Australia, unless for annual leave. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: You may return to Australia for annual leave. | Detailed Reasoning - (vii) Family, business and financial ties: Family You have no family in Australia. Business or economic You have (with your spouse) a dwelling in Australia which is not being rented as it is on the market to be sold. You relocated to the foreign country to live and work in the recent year. Your employment contract will be effective from the recent year until a subsequent year. It has been indicated to you that you would be able to extend the contract or enter into a new contract for further employment. You will have funds transmitted monthly to Australia to cover mortgage repayments and necessary insurances and other bills. You do not have a position or job being held for you in Australia. Assets You own a house in Australia (with your spouse) which is on the market to be sold. It is the only real property owned or controlled by you. Your other assets in Australia are accounts held with an Australian bank: • a cheque account • a savings account • a Visa card and • a mortgage account. You also have a private superannuation account with a certain fund. | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: Case law has shown that an individual is more likely to be considered to be residing in Australia where a place of residence remains available for the individual and/or family members to live in. Conversely, this may be less likely if the residence is sold or rented to tenants. In Australia, you own a house in Australia (with your spouse) which is on the market to be sold. You lived in this house with your spouse before moving to the foreign country. | Detailed Reasoning - Summary of the resides test: As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically: • you have a visa which allows you to stay in the foreign country while you are employed there and you are not a permanent resident of any other country • you are a citizen of Australia and will remain so while in the foreign country • you maintain several accounts in Australia with the bank and have funds transmitted monthly to Australia to cover mortgage repayments and necessary insurances and other bills • you have an account in Australia with a certain fund. • You have a dwelling in Australia that is available for your use. 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 while in the foreign country. Therefore, you will remain a resident of Australia under the 'resides' test. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument. | Detailed Reasoning - The domicile 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. Domicile A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case, you were born in Australia. Therefore, your domicile of origin is Australia. Your domicile will still be Australia while you are working in the foreign country as you have not indicated that you will be taking any legal steps to change your domicile to that country. 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. It is clear from the case law that 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. You live with your spouse in rented accommodation in the foreign country and will continue to do so as long as your employment there continues. Once your employment ceases, your right to remains in the foreign country ceases. The Commissioner is not satisfied they have a permanent place of abode outside of Australia. Therefore, you will remain a resident of Australia under the domicile test. | Detailed Reasoning - Your residency status: As you have passed the resides and domicile tests of residency, you will remain a resident of Australia for tax purposes while in the foreign country.