Private ruling: Residency status
Published: August 2013
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Will you remain a resident of Australia for income tax purposes while you are working in country T? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You were born in country T and moved to Australia when you were a minor. You became a citizen of Australia. You are single with no dependents. Since you were a minor you have continuously lived in Australia, with the exception of a short period between where you lived and worked in county Z. You later formed the intention to live and work for an indefinite period in country T after finding out employment opportunities were being offered. You successfully applied for a position with employer H in country T, and shortly after accepted an employment. You will depart once you have taken care of your affairs in Australia. You will not purchase a return ticket to Australia. You are currently employed in Australia, and will to terminate your employment prior to departing Australia. You are currently living in shared rental accommodation that you will give one months notice prior to your departure. You will enter country T with an employer sponsored working visa. The visa allows you to stay in country T for as long as you remain employed by employer H. You have provided a copy of your employment contract that outlines the following conditions and benefits: · (Agreement) employee, (the Employee") of Australian address. · (schedule 2.4) The agreement is for an undefined duration and may be terminated in accordance with clause 8 (contained within your employment contract); · (schedule 5.2) The employee and eligible dependants shall be eligible for the value of an annual flight ticket from country T to the Point of Origin. This allowance is calculated as an annual allowance based on prevailing rates and paid monthly; · (schedule 5.3) The employee and eligible dependants will receive housing assistance, either in the form of accommodation or a housing allowance, further particulars of which are set out in Schedule 1. · (schedule 5.4) Where the employee is eligible for the payment of a housing allowance, employer H will provide fully furnished transitional housing for a period of up to 90 days from the Start Date to enable the Employee to secure rental accommodation. During periods of transitional housing occupation, the Employee will not be eligible for housing. · (schedule 5.5) Where a housing allowance is provided, the employee may be eligible for a furniture allowance as set out in Schedule 1 . The furniture allowance is depreciated over a period of 4 years and is paid to the Employee in a lump sum once the Probation Period comes to an end. The furniture allowance or part thereof is repayable if the employee leaves employee H before the allowance is fully depreciated. · (schedule 9.4) Upon termination the employee and Eligible Dependants will be provided with air travel tickets to return to Point of Origin, unless the Employee elects to remain and work for another employer in country T. · (Definitions) Point of Origin means the closest international airport to the location where the Employee is domiciled at the Effective Date, unless other wise agreed with employer H in writing. The Point of Origin is set out in Schedule 1. · (Definitions) Start date means the date the employee departs from point of origin, or such other place as agreed by employer H in writing. · (Schedule 1) Point of origin - Australia · (Schedule 1) Total monthly remuneration: o Basic salary o Housing allowance o Transport allowance o Mobile allowance o Furniture allowance, paid upon expiry of Probation Period and depreciated over a 4 year period in accordance with employer H policies. Within a short period, you will to find long term rental accommodation which you will establish as your permanent place of abode in country T. You will open a bank account in country T once all the necessary country T regulatory requirements are satisfied. Your remuneration from your employment in country T, will be paid by your country T employer in local currency into your country T bank account. You will return to Australia once every 2 nd year for a short period. In the alternate years it is intended that your parent will visit you in country T. When you return to Australia you will stay with family. Your assets in Australia consist of a rental property and bank accounts. Your rental property will continue to be rented through a real estate agent while you are employed overseas and your bank accounts will remain open to deal with rent receipts and expenses in respect of this property. You have disposed of all your Australian shares. All of your personal items including furniture and other belongings will be disposed of or given to charity prior to your departure from Australia. Your social and sporting ties in Australia consist of a circle of friends in addition to your parent who resides in A and adult sibling who resides in B. You do not have any assets overseas. You do not have any social or sporting ties with country T You will inform the relevant financial and non financial institutions including Medicare, the Australian Electoral Commission etc. of your intention of leaving Australia for an indefinite period. You have never been an Australian Commonwealth Government Employee. Your intention is to leave Australia to live and work in country T indefinitely. You have included a copy of your overseas employment contract and a rental agreement in your private ruling request.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1 | Income Tax Assessment Act 1936 Subsection 6(1) Residency | An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the 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 NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia. | 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 satisfy the conditions of one of the other three tests. | Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). | The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: | · the resides test, | · the domicile (and permanent place of abode) test, | · the 183 day test, and | · the superannuation 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. | 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 it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. | The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'. | In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 (Miller's case) 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 (Case 5/2013 (2003) AATA 394, paragraph 49): | · physical presence in Australia; | · nationality; | · history of residence and movements; | · habits and "mode of life"; | · frequency, regularity and duration of visits to Australia; | · purpose of visits to or absences from Australia; | · family and business ties to Australia and the other country; and | · maintenance of a place of abode. | To determine whether or not you were residing in Australia for taxation purposes during the years in question, it is necessary for us to examine each of these factors in the context of your circumstances. | No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances. | Physical presence in Australia | A person does not necessarily cease to be a resident of a particular place just 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 ( Joachim v Federal Commissioner of Taxation 2002 ATC 2088, at 2090). | You will return to Australia for a short period once every 2 nd year. In the years that you do not return to Australia your parent intends to visit you in country T. | In recent court cases taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia. | In Iyengar v FC of T ( Iyengar's case ), it was indicated that there is a requirement that you at least be physically present in Australia for part of an income year. Further in this case it was considered that the taxpayer remained a resident of Australia for income tax purposes even though during the period he was working overseas (2 years and 7 months) he had only returned to Australia for a two week period and for a 10 day period. | It should also be noted that under schedule 5.2 of your employment contract you are eligible for an annual flight ticket from country T to the Point of Origin which under schedule 1 of your employment contract is Australia. This is indicative of an employment provision that is supportive in enabling an employee to maintain a continuity of association with their point of origin. | We consider that the facts the above indicate that you will maintain continuity with Australia during the financial years included in this ruling. Further this maintenance is financially supported by your employer. | 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 a factor that is considered along with all of the circumstances of each case. | You are an Australian citizen and you have not indicated that you will seek citizenship of any other country. | History of residence and movements | In Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (Iyengar's case), the Tribunal noted that both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident (for taxation purposes) in a country in a particular income year. | Since arriving in Australia as a minor, you have continuously lived in Australia with the exception of a period where you worked and lived in country Z. | You later formed the intention of leaving Australia and making a home in country T for an indefinite period of time after learning that positions were being advertised with employer H in, Country T. You were successful in your application and accepted an employment offer shortly afterwards. | In accepting the employment offer from employer H, country T you will leave Australia to fulfil your contractual obligations overseas. You will enter country T on an employer sponsored visa and as stipulated under Schedule 9.4 of your employment contract upon termination the employee and Eligible Dependants will be provided with air travel tickets to return to the point of origin (Australia), unless the employee elects to remain and work for another employer in country T. This indicates that your continued presence in country T is dependant on your continued employment in that country and further your continued employment with employer H. | Significant is the fact that you only left Australia once you learnt of employment opportunities being offered in country T, this adds significant weight to the conclusion that had this not been the case, you would remain in Australia in your normal occupation. It can be said therefore that had it not been for the employment position being offered in country T, you would ordinarily continue to reside in Australia during the financial years included in this ruling. | In light of the above and consistent with the principles established in the Iyengar case, your history of residence and movements will not be consistent with someone who is no longer residing in Australia. | (iv) Habits and "mode of life" | In Sneddon v FC of T [2012] ATC 10-264 (Sneddens Case) the taxpayer was provided with a fully-furnished apartment leased by his employer. Similarly in case 5/2013 the taxpayer resided in a serviced apartment in Singapore and fully-furnished quarters provided by his employer in India. In both cases the taxpayers were found to be residents of Australia. | In your case, included in your employment contract with employer H are the following provisions; | · (schedule 5.3) The employee and eligible dependants will receive housing assistance, either in the form of accommodation or a housing allowance, further particulars of which are set out in Schedule 1. | · (schedule 5.4) Where the employee is eligible for the payment of a housing allowance, Sidra will provide fully furnished transitional housing for a period of up to 90 days from the Start Date to enable the Employee to secure rental accommodation. During periods of transitional housing occupation =, the Employee will not be eligible for housing. | · (schedule 5.5) Where a housing allowance is provided, the employee may be eligible for a furniture allowance as set out in Schedule 1 . The furniture allowance is depreciated over a period of 4 years and is paid to the Employee in a lump sum once the Probation Period comes to an end. The furniture allowance or part thereof is repayable if the employee leaves Sidra before the allowance is fully depreciated. | Although you are required to find self provided accommodation prior to an initial period, that fact that once you have found suitable accommodation you will be in receipt of a housing and furniture allowance gives rise to the accommodation being employer provided. Thus the only distinction between Case 5/2013 and Sneddon is that it is your choice as to what style of accommodation that you will live in while working in country T. | Further while it is acknowledged that it is your intention to reside in country T indefinitely, as you will be in country T on an employer provided visa, your stay in country T is exclusively contingent on your ongoing employment with employer H. | It should also be noted that during the years included in this ruling you will to continue to maintain your family ties by visiting Australia every 2 nd year while on the alternative years it is intended that your parent visits you in country T. This endeavour is supported by the provision under Schedule 5.2 of your employment contract. | Based on the above, we do not consider anything about your habits and mode of life during the financial years included in this ruling will be inconsistent with you being a resident of Australia for taxation purposes. | (v) Frequency, regularity and duration of visits to Australia | In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that mere fact that visits to a country are of short duration does not of itself exclude residence in that country. | During the financial years included in this ruling you will return to Australia once every 2 nd year for a short period to visit family. | When considering the issue of return visits to Australia by a taxpayer who was living and working overseas, the Tribunal in Iyengar's case also noted that the brevity of a visit to a particular country compared to length of time spent abroad does not of itself exclude an individual from being a resident in the country visited. Further, the taxpayer in Iyengar 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 and was also considered to a resident of Australia for income tax purposes. | It should also be noted that the following provision is included in your employment contract; | 5.20 of your employment contract provides for the provision of an annual flight from country T to the Point of Origin, which contained in Schedule 1 is Australia. | This indicates that your employer is active in supporting your return to your point of origin annually to enable you to maintain your ties. As previously mentioned under Schedule 1 and 13 your point of origin is stated as being Australia. | Considering the above, we do not consider the relatively short duration of your intended return trips to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes in each of the income years included in this ruling. | (vi) Purpose of visits to or absences from Australia | The details of your intended return trips to Australia during the financial years included in this ruling are discussed above. As stated, we do not consider the brevity of those trips precludes you from being considered a resident of Australia for taxation purposes and the fact that you intend to use these trips to visit family is a clear indication that you intend to continue to maintain a continuity of association with Australia during the years in question. | As previously stated your intention to maintain a continuity of association with Australia is supported by your employer through the provision in your employment contract of an annual airplane ticket to Australia which is stated as your point of origin. | With regard to the purpose of your absence from Australia, your circumstances indicate that your absence from Australia is for the purpose of filling your contractual obligations with employer H. We have formed this view as it was not until you discovered that employment opportunities existed in country T that you formed an intention to live and work in country T for an indefinite period. Further Schedule 9.4 of your employment contract states; | Upon termination the employee and Eligible Dependants will be provided with air travel tickets to return to Point of Origin, unless the Employee elects to remain and work for another employer in country T. | The above indicates that your continued presence in country T is contingent upon your continued employment employer H. | In light of the above, we consider that the purpose of your visits to Australia and absences from Australia is sufficient to preclude you from being considered a non resident of Australia for taxation purposes in each of the income years included in this ruling. | (vii) Family and business ties to Australia and the overseas country or countries | Family | You have a parent and sibling who will continue to reside in Australia while are engaged in your employment in country T. In contrast you have no family that reside in country T. | It is significant that in the recent decisions regarding the residency status of persons working overseas, including Beizuidenhout , Case 5/2013 , and Iyengar , the taxpayers both had family residing permanently in Australia. There is particular emphasis placed in these decisions on the taxpayers' Australian residence being the 'family home'. | The Macquarie Dictionary defines 'family' as: | · parents and their children, whether dwelling together or not. | · one's children collectively. | · any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins. | Consistent with the findings in Case 5/2013 and Iyengar , and the definition of family provided by the Macquarie Dictionary the fact that your parent and sibling will continue to permanently reside in Australia indicates the strength of your family ties to Australia as opposed to your family ties in country T. Further have you listed your purpose of returning to Australia was to visit your family. | Clearly your family ties are far stronger in Australia than they are in country T. | Business or economic | While it is acknowledged that during the income years you will be employed by ere employed by employer H, country T where you will derive income, from the information that you have provided this is the only business or economic tie that you will have with country T. | You own an investment property in Australia and will maintain your Australian bank accounts. | From the information that you have provided your business or economic ties in terms of your investment property and bank accounts, are significantly stronger in Australia than they are in country T for the years included in this ruling. | Assets | Your assets in Australia consist of an investment property and bank accounts, while in country T your only asset will be a bank account that you intend to open on arrival. | From the information that you have provided you have not stated any intention to purchase any property of substance in country T, further it is your intention to live in employer sponsored accommodation and not purchase. | Your case is simular to the taxpayer in the Iyengar case where the taxpayer was found to be a resident of Australia for tax purposes. In that case the taxpayer did not purchase substantial property whilst overseas, but retained assets in Australia. | The fact that you have not made mention that you intend to purchase any assets of substance in country T, while continuing to maintain your assets in Australia is not consistent with a person who is intending to reside in that country indefinitely. This view is consistent with the findings in the Iyengar case, where the taxpayer was found to be a resident of Australia for income tax purposes. | Maintenance of Place of abode | You are currently living shared rental accommodation; therefore as you are living in this style of accommodation it is acknowledged that you not maintaining a place abode in Australia. However it should be noted that you do own an investment property which you will continue to maintain. | Conclusion | While it is acknowledged that you are currently living in shared rental accommodation and therefore are not maintaining a place of abode in Australia, it should be noted that you do own an investment property in Australia. | However with regards to the remaining factors, your circumstances are markedly similar to Sneddon v FC of T, Iyengar v FC of T and Case 5/2013, all of whom were found to be residents of Australia for income tax purposes. Significantly, the emphasis given in these cases to the place where the taxpayer's 'family' resides, physical presence in Australia, family and business ties to Australia and habits and mode of life. Consistent with the findings in these cases, the actions and patterns that you intend to exhibit are not consistent with someone who has left Australia indefinitely. They are more consistent with someone whom while being employed overseas is maintaining a continuity of association with Australia. | Based on a consideration of all of the factors outlined above, it is concluded that you will continue to be a resident of Australia under the resides test for income tax purposes during the income years that are included in this ruling. | 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. | A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. From the information that you have provided, you have not indicated that you will seek to become a citizen or permanent resident of country T and will remain a citizen of Australia. Therefore it is considered your Australian domicile will remain unchanged. | 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. | Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: | a) the intended and actual length of the taxpayer's stay in the overseas country; | b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; | c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; | d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; | e) the duration and continuity of the taxpayer's presence in the overseas country; and | f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. | In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: | The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. | From the day that you depart Australia your circumstances will be the following: | · you will leave Australia to live and work in country T for an indefinite period of time; | · you have accepted an employment contract for an indefinite period with the employer H in , country T; | · you will arrive in country T on an employer provided visa that is conditional on your continued employment for employer H, in country T; | · although you will live in employer provided accommodations for a short period before finding long term self provided rental accommodation in country T, you will be eligible to receive a housing allowance in addition to a furniture allowance, this indicates that the self provided accommodation is being funded by your employer; | · your assets in Australia consist of an investment property that will continue to be rented out and a bank account that will be used to manage your rental property; | · you will dispose of all your personal items in Australia; | · you will return to Australia once every 2 years for a short period to visit family in Australia while your parent will travel to country T to visit you every other year; | · you are single with no dependants; | · you will inform the relevant government authorities, that you are departing Australia indefinitely; | · your assets in Australia consist of an investment property that will continue to be rented out and a bank account that will be used to manage your rental property; | · you do not own any assets in country T. | Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour will not be consistent with someone establishing a permanent place of abode outside of Australia. Although it is your intention to reside in country T indefinitely, as you will enter country T on an employer sponsored working visa, your continued presence in country T is conditional on your continued employment with employer H. Also you will live in employer provided accommodation for an initial period, before moving to self selected employer sponsored accommodation. These facts give rise to the supposition that the durability and continuity of your presence in country T is contingent on your continued employment with employer H and not any desire that you may have to stay in country T indefinitely. | Accordingly, as your Australian domicile will remain unchanged and the Commissioner is not satisfied that you will establish a permanent place of abode outside of Australia, you will continue to be a resident of Australia for income tax purposes in the years that are included in this ruling. | Conclusion | As it has been established that you will continue to be a resident of Australia under both the resides test and the domicile test, there is no need to consider the remaining 2 tests. Therefore you will continue to be a resident of Australia for income tax purposes for the income years included in this ruling under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.