Private ruling: Residency for income tax
Date of advice: 26 March 2018
Published: June 2018
Ruling period: Year Ending 20XX | Year Ending 20XX
Date scheme commenced: March 20XX

Ruling: Q1: Am I an Australian resident for tax purposes? | A1: Yes

Relevant facts and circumstances: You arrived in Australia in 20XX, on a 457 visa. You obtained permanent residency in 20XX. You entered into a contract with Company Y. The contract was to work in the Country X for a year. The contract was set to start in March 20XX. You commenced work in July 20XX. Your contract was extended to March 20XX. You acquired a work/residence visa for your new job. This visa allows you to stay for two years, pending your employment status. The visa was supplied by your employer. You expressed no intention to stay in the Country X permanently. You would try to stay working in the Country X until a better job prospect came up elsewhere. You relocated to the Country X while your family stayed in Australia. You are entitled to 30 days leave, which is used to visit your family in Australia. Your residence in the Country X is a small studio apartment paid by yourself with no compensation from your employer. You live in your apartment alone. You maintain a home in Australia, where your family and children reside. Your children attend school in Australia. You didn’t receive any income from Australian sources. You hold a bank account in the Country X for the purposes of payment of your salary. You hold no social ties to the Country X. You have obtained a Country X driver’s license. You have no professional or occupational memberships with Australia. You did not inform the Australian Electoral Commission or Medicare of your departure from Australia. You did not advise your private health insurer that you were leaving Australia. Neither you nor your spouse, have ever been employed by the Commonwealth of Australia. Neither you nor your spouses are members of the Public Sector Superannuation Scheme or Commonwealth Superannuation Scheme.

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 section 6-5

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 derived 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. This includes employment income, rental income, Australian pensions and annuities and capital gains on Australian assets. 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: ● resides test ● domicile and permanent place of abode test ● 183 day test and ● Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - The resides (ordinary concepts) test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3rd 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 Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year: ● 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 with Australia compare to the foreign country concerned; and ● Maintenance of a place of abode. The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive. Taxation Ruling IT 2650 Income Tax: Residency – permanent place of abode outside Australia , emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. | Detailed Reasoning - Physical presence in Australia: Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia considers physical presence and length of time by itself, not determinative of residency. The ruling also makes reference to an individual's behaviour, which is shown to have a degree of continuity, routine or habit that is consistent with residing in Australia as relevant. | Detailed Reasoning - Nationality: 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 drawn from all the relevant facts ( Levene v IR Commrs (1928) 13 TC 486 at 506 per Lord Cave). | Detailed Reasoning - History of Residence and Movements: The past and subsequent history of a person’s residence may be relevant in determining whether that person is ordinarily a resident in a country. You obtained a 457 visa and moved to Australia accompanied by your family. You became permanent residents of Australia on 3 March 20XX. | Detailed Reasoning - Habits and “Mode of Life”: This factor may be drawn upon to help determine if a taxpayer has ceased to reside in Australia. In your case as you have no social ties to the Country X this factor is not relevant. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: You are allowed 30 days of leave a year granted by your employer. You decide to come to your house in Australia to visit your family which reside there. | Detailed Reasoning - Purpose of Visits to or Absences from Australia: The facts show that you left Australia for the Country X on a one year contract to earn an income. This one year contract was extended for an extra year which will end in March 20XX. You visited Australia to visit your family using your leave entitlements. | Detailed Reasoning - Family and business ties with Australia: The house purchased before you left for the Country X is where your family is located. Your wife and two children live in this house on a permanent basis, with your two children attending the local school. | Detailed Reasoning - Maintenance of a place of abode: You have a family home in City A which you visit every year. You also have a place over in the Country X where you alone reside and claim as your usual place of abode. This place is not provided by your employer and is paid and maintained by yourself. Based on the totality of the facts and the weighting that each point has on the status of your residency, your behaviour is consistent with a resident of Australia for Income Tax purposes meaning you satisfy the Resides test. This is based on the nature of your behaviour showing regularity and frequency in visits to Australia, with the purpose of visiting your family whom reside in house you maintain for the purposes of being your family’s home. You also show no clear intention of abandoning Australia and settling in the Country X as you have not made definitive steps towards setting up a permanent place of abode (e.g. not actively being involved in the community through sporting/social clubs, not purchasing a house in the Country X, your family also didn’t accompany you to the Country X, etc.) | Detailed Reasoning - The domicile test: Having reached the conclusion that you are a resident of Australia under the resides test the other three statutory tests are not required to be satisfied for the purpose of determining residency for tax purposes. However for completeness we have examined your case through the domicile test. If a person’s domicile is Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. In your case you have not demonstrated that your domicile is not in Australia for the following reasons: ● You still have your family here in Australia, with your children going to school in the local area ● You purchased a house here in Australia for you and your family to live in prior to leaving for work ● Although you have set up a place of abode in the Country X, you still have not shown any clear intention of abandoning Australia and setting up permanent residency in the Country X. This is due to you not having purchased your place of dwelling in the Country X, but rather renting it on a temporary basis. ● You only have a work/residence visa permitting you to stay in the Country X for two years which was supplied by your employer. ● You have explicitly stated that you have no intention of staying in the Country X, but will until a better position is secured, preferably in Australia. ● You did not inform your private health insurer, nor Medicare or the AEC of your departure from Australia, showing that you did not expect to leave Australia for an indefinite time period. ● You have shown no intention of setting up social ties to the Country X ● The only asset you have acquired is that of a Country X Commercial Bank account where your monthly salary is credited Under the domicile test you are classified as a resident of Australia, as you have shown no intention of permanently abandoning Australia through your strong family ties as well as the lack of a different domicile in the Country X through an operation of law. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You do not satisfy this test as you are based in the Country X at least three quarters of the year. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is: ● a member of the superannuation scheme established by deed under the Superannuation Act 1990; or ● an eligible employee for the purposes of the Superannuation Act 1976; or ● The spouse or a child under 16, of a person covered by the above. You do not satisfy this test due to you and your spouse not being eligible to contribute to the relevant Commonwealth superannuation funds. | Detailed Reasoning - Your residency status: As you satisfy both the resides and domicile tests for residency as outlined in subsection 6(1) of the ITAA 1936, you are classified as a resident of Australia for income tax purposes for the year ended 30 June 20XX, and will also be deemed an Australian resident for the year ended 30 June 20XX.