Private ruling: Residency
Published: May 2015
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and Answer | Are you a resident of Australia for taxation purposes? | Yes

Relevant facts and circumstances: You were born in Australia and are an Australian citizen. You have worked for an Australian company for just over 3 years. You have been offered a 12 month secondment to work in country X. The secondment will commence in June 2015. After the secondment, you will return to your Australian employment. During your secondment in country X, apartment accommodation will be provided. You will live in a fully-furnished apartment sharing with one other person. You do not have a spouse and children. You own a car, a motorbike, some shares in Australia, and you maintain a saving account in Australia. You have not advised the Australian Electoral Office to have your name removed from the electoral roll. You have not advised Medicare or health insurance provider to have your name removed from their records. You are not a Commonwealth Government of Australia employee for superannuation purposes. You do not intend to reside overseas permanently.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1997 Subsection 6-5(2)

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' and 'permanent place of abode' test; • the 183 day test; and • the Commonwealth superannuation 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 taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and all the circumstances of the taxpayer are taken into account in arriving at a decision. In your case, although you intend to be physically absent from Australia, there are various factors indicate that you have not ceased to be a resident of Australia. Specifically: • you will be relocated to country X for secondment; • your secondment will be for 12 months; • you will return to Australia after the secondment; • you will return to your Australian employment after the secondment; • you intend to work in country X for only 12 months; • you do not intend to live and work in country X indefinitely; and • your main financial assets are in Australia. Based on the information provided, you will be residing in Australia according to the ordinary meaning of the word. Therefore, you are a resident of Australia for taxation purposes under this test. Whilst it is not necessary to meet more than one test to determine residency for income tax purposes, we will also include a discussion of the 'domicile' and 'permanent place of abode' test as an alternative argument. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Australia for taxation purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - 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, your domicile of origin is Australia and there is no evidence to suggest that you will establish a new domicile in country X. Therefore, your domicile will still be Australia. | Detailed Reasoning - Permanent place of abode: 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. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1852) 117 E.R. 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A permanent place of abode does not have to be everlasting or forever but it is to be contrasted with temporary or transitory. Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual's permanent place of abode. These factors include: a) the intended and actual length of the individual's stay in the overseas country; b) any intention either to return to Australia at some definite point in time or to travel to another country; c) the establishment of a home outside Australia; d) the abandonment of any residence or place of abode the individual may have had in Australia; e) the duration and continuity of the individual's presence in the overseas country; and f) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer's children, family ties. Generally speaking, a taxpayer who leaves Australia with an intention of returning to Australia at the end of a transitory stay overseas would remain a resident of Australia for taxation purposes unless the Commissioner is satisfied that the taxpayer's permanent place of abode is outside Australia. In your case, you will be relocated to country X for a 12 month secondment. During your stay in country X, apartment accommodation will be provided by your employer. You will live in a fully-furnished apartment sharing with one other person. Moreover, you will return to Australia after the secondment and you do not intend to live and work in country X indefinitely. Based on the information provided, the Commissioner is not satisfied that you will have a permanent place of abode outside of Australia and therefore you are considered a resident of Australia for taxation purposes under the domicile test. As a resident of Australia for taxation purposes you are required to include your worldwide income in your Australian tax return.