Private ruling: Residency
Date of advice: 18 April 2017
Published: September 2017
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: Yes

Relevant facts and circumstances: You country of origin is Australia. You are a citizen of Australia. You were offered a position in Foreign Country X. You departed for Foreign Country X. The initial contract was for a period of time. You then secured a permanent position. You enter Foreign Country X on an employment visa which does not allow you to stay permanently. You have to renew your employment visa every 2 years. You have been living in a rental apartment in Foreign Country X. You have personal belongings and bank accounts in Foreign Country X. Your position requires you to travel extensively. You lodged Salaries Tax return in Foreign Country X. Your family does not accompany you to Foreign Country X. The reason for that is: your spouse is the main carer for elderly parents; your oldest child works and your younger child is currently studying in the university. You own a family house in Australia (the property). The property is jointly owned by you and your spouse with a mortgage. The mortgage is also in joint names. You stayed in your own house with your family while in Australia. You also own vehicles, bank accounts in Australia. You made several trips to Australia. You have advised the Australian Electoral Commission that you were departing Australia. You have not advised Medicare to have your name removed from their records. You have not advised any Australian financial institutions that you were departing Australia. You are not members of any clubs or associations in Australia. You and your spouse are not Commonwealth Government of Australia employees for superannuation purposes.

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

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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. | 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 IT 2650 Income tax: residency - permanent place of abode outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. In the recent case of Iyengar v FCT 2011 ATC 10-222, the AAT held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. In your case, you were employed in Foreign Country X, you enter Foreign Country X with an employment visa which requires you to renew it every two years; you live in a rented apartment in Foreign Country X. You and your spouse jointly own a family house in Australia with mortgage, your spouse and children do not accompany you to Foreign Country X and they stay in Australia all the time; you made several trips to Australia, you stayed with your family in Australia while visiting them. To apply these rules in your case, based on the facts provided, 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 taxation 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 (and permanent place of abode) test: Under this test, a person whose domicile is Australia will be considered a resident of Australia for taxation purposes; 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 to prove an intention to make his or her home indefinitely in that country. In your case, your domicile of origin is Australia and there is no evidence to suggest that you will establish a new domicile in Foreign Country X. Therefore, your domicile is Australia. 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. The Commissioner is not satisfied that you set up a permanent place of abode outside Australia for the following reasons: ● you have a family house in Australia; ● your family members are in Australia and you visit them several time every financial year; ● you live in a rented apartment in Foreign Country X and your position requires you to travel extensively. You are a resident of Australia for taxation purposes under this test. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you are a resident of Australia for taxation purposes. Section 6-5 of the 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. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid overseas. Please refer to our website www.ato.gov.au for further information regarding foreign income tax offset.