Private ruling: Residency status
Published: January 2014

Ruling: Question and answer: | Are you a resident of Australia for income tax purposes? | Yes. | Year ending 30 June 2013 | 1 July 2012 | You were born in the country Y and migrated to Australia when you were a minor. | You are a citizen of both Australia and country Y. | You had a spouse, however you separated from your spouse. | You have a dependant of whom your spouse has custody. | Upon accepting full time employment from organisation ABC in country Z you departed Australia. | You stated on your Immigration outgoing card that you were leaving Australia for work purposes. | You entered country Z on a working visa that is required to be renewed annually. | Upon completion of contract with organisation ABC you then accepted fulltime employment with organisation XYZ also in country Z for an extended period with an option of an extension. | Your overseas employment income is banked into an Australia bank account. | Prior to leaving Australia you lived in rental accommodation. A portion of your overseas income is used to continue to pay the rent for this rental property for the purpose of providing your dependant and ex-spouse with a place to live. | You also provide financial assistance for your dependents medical needs. | You formed the intention to make your home indefinitely outside Australia when your relationship with your ex-spouse became increasingly stressful. | While employed in country Z you live in employer provided accommodations for which you have sole use. | You are also supplied with a company car. | You have returned to Australia for brief periods on a number of occasions for personal reasons. | Your assets in country Z consist of furniture, household effects, and personal effects. | You do not have any assets in Australia. | You do not have any social and sporting connections with Australia and have only limited family ties in Australia. | Most of your relatives live overseas. | Your social and sporting ties in country Z consist of memberships to a number of clubs and a network of local friends that you regularly socialise with. | Neither you nor your ex-spouse were Commonwealth Government of Australia employees. | You have not advised the Australian Electoral Office or Medicare of your intention to reside indefinitely overseas. | Your employer in country Z provides you with full health care cover. | Due to your skill base you have future plans to work in other overseas countries. | You intend to spend lesser time in Australia in the future. | 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 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. | The resides test | In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; ( 2002) 51 ATR 1173 at paragraph 43-44 , it was determined that the word ' resides' should be given the widest meaning. | Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia , identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes. | · intention or purpose of presence; | · family and business/employment ties; | · maintenance and location of assets; and | · social and living arrangements. | Paragraph 21 of TR 98/17 further states that: | No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances. | Recent case law decisions have expanded on the list of factors identified in TR 98/17. Case 5/2013 and Sneddon v FC of T (Sneddons Case) , for example, considered the following factors in relation to whether the taxpayer resided in Australia: | (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. | Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1). | 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). | 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. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 ( 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. | In your case, you sought employment overseas due to the stress that had resulted from your marriage breakdown. You left Australia after being successfully in obtaining overseas employment. From the information that you have provided, you have returned to Australia on a number of occasions since first departing Australia for personal reasons. The duration of your stays were brief. | It is acknowledged that your presence in Australia were for brief periods and for personal reasons. However consistent with the principles established in the Iyengar's case , we consider that this presence is sufficient to demonstrate that you were maintaining an ongoing continuity of association with Australia for the year included in this ruling. | Nationality | In Iyengar's Case , it was noted that in most cases, the nationality of a person would not be a factor to be taken into account along with other circumstances in determining where his or her residence is. However, in cases that could go either way, the citizenship of a person may not be completely irrelevant in the conclusion to be drawn from all the relevant facts | In your case, you are both an Australian and country Y. From the information that you have provided you are required to renew your country Z visa annually. Further you have not indicated whether you have sought a more permanent residency status in country Z. | History of residence and movements | In 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. Significant in Iyengar's Case is that when he for filled a long term overseas employment opportunity he would return to his home in Australia for a break before leaving Australia and taking on another overseas employment opportunity. | In your circumstances, you were born in the country Y and migrated with your family to Australia when you were a minor. You lived in Australia with your ex-spouse and dependant until you separated from your spouse. Due to the stress of your marriage breakdown you sought employment overseas. | Your circumstances differ from those in Iyengar's Case due to the fact that sought employment overseas due to the stress of your marriage breakdown. However what is consistent is that you left Australia to fulfil an employment opportunity overseas. Further, on the occasions that you have returned to Australia you have stayed with your family. | In light of the above and consistent with the principles established in Iyengar's Case , your history of residence and movements are not consistent with someone who is no longer residing in Australia. | (iv) Habits and "mode of life" | In recent cases a taxpayer's habits and mode of life in the country where they are/had been living were considered when determining whether a taxpayer continued to be a residence of Australia for income tax purposes. | In Sneddon's Case, the taxpayer who was found by the court to be a resident of Australia for tax purposes lived in a fully-furnished apartment leased by his overseas employer. The taxpayer's only expenses were his every day living expenses and some furniture and household items that he purchased to make the fully-furnished apartment, provided by his employer more comfortable. Further his employment income was paid in Australian dollars into an Australian bank account and predominantly used to meet his Australian obligations. | Your case is simular to that of the taxpayer in Sneddon's Case. While it is acknowledged that you were required to furnish the accommodations that you live in while in country Z, this accommodation has been provided for by your employer. Therefore the only distinction between your circumstance and that provided in Sneddon's Case is that you were required to furnish the accommodations. Further consistent with the circumstances in Sneddon's Case your remuneration is being paid into an Australian bank account and is used in part to support your dependant who has remained in Australia. | In Iyengar's Case, the taxpayer stated that he was a member of several overseas sporting and recreational associations in the overseas country where he was employed. However the court held that these activities were considered normal pursuits for most normal expatriate persons who are employed abroad | Since your arrival in country Z it is acknowledged that you have established a number of social and sporting ties including and have a network of local friends that you regularly socialise with. However, consistent with the principles established in Iyengar's Case, these activities are normal pursuits for most normal expatriate persons who are employed abroad and therefore do not add any weight in determining your residency status for income tax purposes. | In considering the above and based on the findings in Sneddon's Case and Iyengar's Case , your habits and mode of life are not consistent with someone who has ceased to be a resident of Australia for tax purposes. | (v) Frequency, regularity and duration of visits to Australia | In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 ( Lysaght's Case ) the Court noted that mere fact that visits to a country are of short duration does not of itself exclude residence in that country. | As previously discussed, 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's Case 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. | You have returned to Australia on a number of occasions since first departing for brief periods. Considering the principles established in Iyengar's Case and Lysaght's Case , we do not consider the frequency, regularity and relatively short duration of your visits to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes post your departure from Australia. | (vi) Purpose of visits to or absences from Australia | In Iyengar's Case, the evidence was that Mr Iyengar's intention was to go to Dubai (and later Doha) and work for their employer for as long as it took to complete an employment contract and then to return to Australia, which he did. His motivation for doing so was to use the money he earned under the contract support his family by paying down the mortgage on their Australian home as soon as possible. Such an intention (and motive) is indicative that the taxpayer was an Australian "resident" in the relevant period. | In considering the purpose of your absence from Australia, you have stated that due to the stress of your marriage breakdown you sought employment opportunities overseas. During you marriage breakdown you began a short term employment contract in country Z. On your immigration outgoing cards you have stated that the reason for your departures from Australia was for work purposes. | The details of your return trips to Australia are discussed above. You returned to Australia on a number of occasions during the year in question for family reasons. This indicates that you were continuing to maintain a continuity of association with Australia whilst living in country Z. | In light of the above, your visits to Australia were for the purpose of maintaining your continuity of association with Australia, while your absences from Australia are for employment purposes. These actions are 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, assets, business ties to Australia and the overseas country or countries | In Iyengar's Case , the court held that, despite the fact that Mr Iyengar spent almost 2 years and 7 months working in Dubai and later Doha for Maersk, his family ties with Australia were such that he remained a "resident of Australia" in the relevant years of income. That is, after moving to Australia from India in 1998 he and his family took the step of becoming Australian citizens 2003 and acquiring a home in about 2003. While he was overseas working on the Contract for Maersk, his wife, daughter and son remained in Australia (except for three short visits to Dubai by his wife), his most substantial asset (the Winthrop home) was located in Australia, he used almost all of the money he earned abroad to make accelerated payments on his Australian mortgage on the Winthrop home (which he acknowledged he considered to be the "family home") and he took his holidays (albeit short) in Australia at the Winthrop home with his family: Shand and Crockett. | In your case, you accepted an employment opportunity in Country Z. Your ex-spouse and dependant child have remained in Australia. You do not own any substantial assets in either Australia or Country Z. Significant is that the income that you derive overseas is paid into an Australian bank account and is used in part to provide a home that your ex-spouse and child reside in as well as to pay for your child's health care needs. | Therefore, based on the above and consistent principles established in Iyengar's Case and based on the above, your family, assets and business ties to Australia are sufficient to preclude you from being considered non resident for income tax purposes. | Maintenance of Place of abode | In Iyengar's Case , the court held that another important factor in determining whether or not a person has ceased to be resident in a particular country is whether the person maintains a 'place of abode' in that country, whether owned by them or not, when they are absent from that country. In Australia, the maintenance of a home in a particular place has usually arisen in relation to the question whether the taxpayer had a "permanent place of abode" outside Australia within the meaning of the first statutory test (the domicile test) in section 6(1)(a)(i) of the ITAA 1936. | In your case, while in country Z you live in employer provided accommodation. In contrast you have continued to rent a property in Australia in order to provide a home for your dependant. You have returned to this home on occasion when you have visited your dependant in Australia. | In light of the above it is considered that you are continuing to maintain a place of abode in Australia. This is not consistent with someone who has ceased to be a resident of Australia for income tax purposes. | Conclusion | It is acknowledged that you are living and working in Country Z, you are living in self furnished accommodation and you have a circle of friends and have engaged with several sporting and social clubs while in Country Z. | With regards to the remaining factors and the findings in recent case's including Sneddon's Case, Iyengar's Case and c ase 5/2013 , all of whom were found to be residents of Australia for income tax purposes the following are significant. Your employer has provided you with accommodation while you are employed in country Z. You have returned return to Australia on a number of occasions for family reasons. You have remained a citizen of Australia and you are required to renew your country Z visa annually. Your ongoing employment is also required to be renewed. Significantly, is that you are remunerated for the services that you provide in an Australian bank account and are continuing to pay the rent on a dwelling that you on occasion return to in Australia. | In 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. In your case you were born in the UK and therefore your domicile of origin is the UK. At the age of 5 you migrated to Australia and later became an Australian citizen, therefore electing Australia as your domicile of choice. From the information that you have provided you have not demonstrated any intention of becoming a country Z citizen, therefore your Australian domicile remains 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. | Your circumstances are as follows: | · due to the stress that resulted from your marriage breakdown you sought employment opportunities overseas; | · after being successful you departed Australia to begin an employment contract in country Z; | · after completing your first employment assignment you were offered a an employment contract with another employer in country Z for extended period, with an option for an extension; | · you formed an intension of living overseas after the breakdown of your marriage; | · you arrived in country Z on a working visa that is required to be renewed annually; | · in country Z you live in accommodation that is provided for by your employer; | · you have returned to Australia on a number of occasions for personal reasons; | · your assets in country Z consist of household furnishings; | · you do not own any assets in Australia; | · your ex-spouse and daughter remain in Australia; | · you are remunerated for your overseas employment into an Australian bank account; | · a portion of your income derived overseas is used to support your family in Australia; and | · you have not informed the Australian Electoral Office or Medicare that you have left Australia indefinitely. | Based on these facts and the greater weight applied against factors (c), (e) and (f), the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. | Significant in reaching this conclusion is that while it is your desire to remain overseas indefinitely, this desire is currently dependent on your working visa being renewed annually. Further you are living in employer sponsored accommodations that are dependent on your continued employment, your family ties remain in Australia and you are yet to inform any Australian Government agency of your intention to remain overseas indefinitely. Significant is that your salary is being paid into an Australia account with a portion of that salary being used to support your dependant in Australia. | Accordingly, as your Australian domicile will remain unchanged and the Commissioner is not satisfied that you have establish a permanent place of abode outside of Australia, you will continue to be a resident of Australia for income tax purposes in for years that are included in this ruling under the 'domicile test'. | Conclusion | As it has been established that you will continue to be a resident of Australia for income tax purposes 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.




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