Private ruling: Residency
Published: January 2014
Ruling period: 1 July 2013 to 30 June 2015.
Date scheme commenced: 1 July 2013.

Ruling: Question and answer: | Will you be a resident of Australia for taxation purposes from 1 July 2013 until 30 June 2015? | Yes.

Relevant facts and circumstances: You were born outside of Australia and have dual citizenship with Australia and another country. You became an Australian citizen more than 30 years ago. You do not have a spouse, partner or any children. You recently left Australia to take up an appointment with an overseas employer (the overseas position). Since leaving Australia you have not been granted permanent residency by any country outside of Australia. You are employed in the overseas position under a contract that expires in 2015 but which could be extended beyond that. You intend to remain working in the overseas position until at least when the contract expires and possibly longer if the contract is extended. You assume you would return to Australia after the contract ceases. You have a renewable residency visa that allows you to live and work in the country where the overseas position is located. Your current visa expires in 2015 at which time it could be renewed for a further two years. The conditions of your visa are such that your entitlement to reside in the overseas country is directly connected to you having employment in that country. Since taking up the overseas position, you have resided continuously in the overseas country. However you have returned to Australia on several occasions for various reasons and for various periods of time. When you first left Australia to take up the overseas position, you indicated on the Australian Immigration Outgoing Passenger Card that you were going overseas to work for a number of years. You propose to undertake several more visits to Australia before 30 June 2015 Since you left Australia to take up the overseas position, you have returned on several occasions to meet a teaching engagement and you intend to return for the same reason on two more occasions before 30 June 2015. You wish to retain the option of voting in Australian elections and have not requested the Australian Electoral Commission remove your name from the electoral roll. You have the following assets in Australia: · your Australian home where you resided before leaving Australia to take up the overseas position, · personal and household effects which have been stored at your Australian home since you left Australia to take up the overseas position, · a rental property, · bank accounts, · shares with an Australian company, and · superannuation fund investments. Since you left Australia to take up the overseas position, your Australian home has been occupied by another person under an informal arrangement and has continued to be available for your use when you return to Australia. This arrangement will continue for the duration of time you are overseas. You have frequently stayed at your Australian home during your return visits to Australia. You receive the following income in Australia: · rent, · interest from bank accounts, · dividends, and · income from a professional source. You have never been employed by the Commonwealth of Australia. You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990 ? You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976? You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS. Since leaving Australia to take up the overseas position you have retained professional links with a number of colleagues and other professionals in your field. You have also retained social connections with friends and relatives in Australia. You have no sporting connections with Australia. Since taking up the overseas position you have developed both professional and social connections in the country you are living in. You have no sporting connections in the country you are living in. You are renting a flat in the overseas country where you are working. The flat is owned by your employer but you are responsible for payment of all rent and utilities (such as power, water, telephone and gas) associated with your occupancy of the flat. The flat will be available to you until 30 June 2015. You have occupied the flat since taking up the overseas position. The flat was provided to you partially furnished but since occupying it you have purchased furniture and other items for the flat. Your assets in the overseas country where you are working are a bank account and the furniture and other items you have acquired to furnish the flat you reside in.

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

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: 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. | Detailed Reasoning - 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 its 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): (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 Australia and the other country, and (viii) maintenance of a place of abode. To determine whether or not you will be residing in Australia for taxation purposes during the period 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. | Detailed Reasoning - 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). For the following reasons, we consider that since you left Australia to take up the overseas position you have maintained and will continue to maintain a significant continuity with Australia, that you are likely to return to Australia when your employment in the overseas position ends, and that you have an attitude that Australia remains your home: · You have already returned to Australia on several occasions and for various professional and personal reasons. · You intend to return to Australia on two more occasions for professional reasons. · You have retained professional links with a number of colleagues and other professionals in your field. You have also retained social connections with friends and relatives in Australia. · Your Australian home has clearly remained available for your use and you have stayed at your Australian home frequently when you have returned to Australia. · Apart from your Australian home, your other assets in Australia include a rental property, shares in an Australian company and bank accounts, all of which you continue to receive income from. · You have also continued to receive income in Australia from teaching and another professional source. · You have not asked to be removed from the electoral roll because you wish to retain the option of voting in Australian elections. · Personal and household effects have been stored at your Australian home since you left Australia to take up the overseas position. · You assume you will return to Australia when your employment in the overseas position ends. | Detailed Reasoning - 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 were born outside of Australia and have dual citizenship with Australia and another country. We do not consider this issue places any weight one way or the other on any determination as to your residency status for taxation purposes. | Detailed Reasoning - 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 . As an Australian citizen you are entitled to permanent residence in Australia. In contrast you are not entitled to permanent residence in the country in which the overseas position is located unless your visa gets renewed for a total of seven years from the time you first entered that country (20xx) to take up the overseas position. Until that time (which would be sometime in a subsequent year) the conditions of your visa are such that without continued employment you are not entitled to continue living in that country. This is a matter of significance in terms of determining where you might ordinarily be considered to be residing for taxation purposes in a particular income year, especially when considered in the light of your history of residence and movements as discussed below. Prior to leaving Australia to take up the overseas position you had spent a significant period of time living and working in Australia. Since taking up the overseas position you have been living and working in the country where the overseas position is located and you intend to remain there until at least 30 June 2015. This means you will spend a period of about X years living and working in the country where the overseas position is located up until the time your contract of employment is due to expire on 30 June 2015. Considering the above, we can see that even if you remain employed in the overseas position until 30 June 2015, your past history of residing in Australia greatly outweighs any history of residing in the country where the overseas position is located. On its own, your past history cannot be considered significant in terms of determining where you would ordinarily be resident for taxation purposes without looking at your history of movements since leaving Australia to take up the overseas position. In relation to that history of movements, it is noteworthy the majority of the return trips to Australia you have made since leaving have been for income producing or other professional reasons and that you intend to earn income in Australia from returning here for professional reasons on two more occasions before 30 June 2015. Furthermore, it is apparent that you only left Australia because you accepted the appointment to the overseas position and had that not happened you would have remained living and working in Australia and it follows, a resident of Australia for taxation purposes. The places where you have physically resided prior to and since leaving Australia to take up the overseas position also fall for consideration in determining where you might ordinarily be considered resident for taxation purposes in any particular income year. One the one hand, prior to leaving Australia you were living in your Australian home which you have maintained and which continues to be available for your use on return trips to Australia. On the other hand, since taking up the overseas position, you have been living in rental accommodation that is owned by your overseas employer and which has been made available to you purely as a result your acceptance of the overseas position. Taking all of the above into account, we consider that your history of residence and movements are such that were it not for your appointment to the overseas position, you would ordinarily be resident in Australia for taxation purposes. | Detailed Reasoning - Habits and 'mode of life': In Iyengar's case the Tribunal noted that examining the habits of life of individuals can be useful to determine whether there has been any change or break in their mode of life which would lead to the conclusion they had ceased to reside in a particular place. Since taking up the overseas position you have developed professional and social connections in the country you are living in however, we do not consider this to be anything more than normal behaviour for an expatriate Australian employed abroad. What is more significant when considering this factor is that since leaving Australia to take up the overseas position you have continued to return to Australia for professional reasons and will do so on some more occasions before 30 June 2015. You have also retained professional and social links with colleagues and other professionals in your field, and with friends and relatives in Australia. We do not consider there will be anything about your habits and mode of life between 1 July 2013 to 30 June 2015 that would support any conclusion that you could be considered to have ceased residing in Australia during that period. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that the mere fact that visits to a country are of short duration does not of itself exclude residence in that country. 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 exclude an individual from being a resident in the country visited. Since leaving Australia to take up the overseas position you have already returned to Australia a number of times and intend to return on several more occasions. Looking at the history of your return trips to Australia to date, it cannot be said those trips have been without frequency or regularity. We especially consider this to be the case with regard to the return trips you have undertaken for professional reasons. You have stated your intention to return to Australia on at least two more, and possibly three occasions between now and 30 June 2015, for professional reasons, something you have regularly returned to Australia to do since leaving to take up the overseas position. Taking all of the above into account, we consider the level of frequency or regularity to your return trips to Australia between 1 July 2013 and 30 June 2015 will be sufficient to add weight to a conclusion that you will remain a resident of Australia for taxation purposes during that period. Furthermore, and as noted above, the brevity of the duration of these return trips is not an issue that detracts from this conclusion. | Detailed Reasoning - Purpose of visits to and absence from Australia: The purpose of your return visits to Australia (actual and proposed) since leaving to take up the overseas position has been discussed previously and the strength of association you maintain with Australia is clearly evident when examining the purpose of those trips. With regard to the purpose of your absence from Australia, it is clearly work related, as opposed to any purpose related to wanting to leave Australia permanently. We consider this to be the case because: · You are employed overseas on a fixed term contract. · You assume you will return to Australia when the contract ceases. · When you first left Australia to take up the overseas position, you indicated on the Australian Immigration Outgoing Passenger Card that you were going overseas to work for a number of years. · You have maintained your Australian home and you continue to make use of that home on return visits to Australia. · You wish to retain the option of voting in Australian elections and have chosen not to have your name removed from the electoral roll for this reason. The strength of your association with Australia and the fact that your absence is only work related and is based on a finite period of time supports a conclusion that you will remain a resident of Australia for taxation purposes during the period of time in question. | Detailed Reasoning - Family and business ties to Australia and to the country you are working in: In terms of family ties (and it is reasonable to consider social and professional ties when looking at this factor) you have maintained family, social and professional ties in Australia since leaving to take up the overseas position. You have also developed social and professional connections in the country you are living in. You have maintained an association with publishers in Australia and receive income from royalties. It can therefore be said you have business ties in Australia. Overall, we do not consider this factor adds any significant weight one way or the other in determining your residency status for taxation purposes. | Detailed Reasoning - Maintenance of a place of abode: When considering this factor in Iyengar's case, the tribunal noted 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. Rather than forgo your Australian home when you left Australia to take up the overseas position (by selling it or renting it out for example), you have continued to maintain your Australian home and it has been available for you to occupy on return visits to Australia. Accordingly, we consider you will be maintaining a place of abode in Australia between 1 July 2013 and 30 June 2015. This is of some significance in determining whether or not you would be a resident in Australia for taxation purposes during that time. | Detailed Reasoning - Application of the resides test to your circumstances: As stated previously, the ordinary meaning of the word 'reside' should be attributed the widest possible meaning when considering the application of the resides test in determining a person's residency status for taxation purposes. With this in mind, and for the reasons outlined above, we have determined that although you will be absent from Australia between 1 July 2013 and 30 June 2015, you will remain a resident of Australia for taxation purposes under the 'resides' test during that period. As we have determined you will be a resident under the 'resides' test, it is not necessary for us to consider the application of any of the other tests of residency to your circumstances. However, we will briefly discuss the application of the domicile test (to which the establishment of a permanent place of abode overseas is relevant) to your circumstances. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. Your domicile of origin was not Australia however, you obtained an Australian domicile when you became an Australian citizen over 30 years ago. As you have not been granted permanent residency by any other country since leaving Australia to take up the overseas position, and as you would not be entitled to remain living in the country where you are currently working if your employment there were to cease, we consider (based on your current facts) that you will retain your Australian domicile up to 30 June 2015. Because you will retain your Australian domicile, you will be considered a resident of Australia for taxation purposes under this test unless the Commissioner is satisfied you have a permanent place of abode outside Australia. Taxation Ruling No. IT 2650 Income Tax: residency - permanent place of abode outside Australia notes that a person's "permanent place of abode" is a question of fact to be determined in the light of all the circumstances of each case and that the expression "permanent place of abode" has been held by the courts to mean a person's "fixed and habitual place of abode". With regards to what is meant by "place of abode", in the High Court's decision in Koitaki Para Rubber Estates Limited v Commissioner of Taxation [1941] HCA 13; 64 CLR 241, Williams J stated (at 64 CLR 241 at 249): Physical presence and intention coincide for most of the time but few people are always home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident here 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 . In Federal Commissioner of Taxation v Applegate 79 ATC 430, in considering whether a person had established a permanent place of abode outside Australia, Fisher J stated (at 79 ATC 4307 at 4317): Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place. You have been living outside of Australia since taking up the overseas position. Since that time you have been residing in a flat that has been made available to you as a direct result of your employment in the overseas position and will continue to be available to until 30 June 2015. You are responsible for payment of rent and utilities in relation to your occupancy of this flat, and have furnished the flat by purchasing various items. Considering the above, we accept that you have established a home overseas and that there is a continuity of presence as far as you residing in the overseas country is concerned. However, your overseas home cannot be considered a 'permanent place of abode' for the reasons discussed below. Firstly, and as discussed in some detail previously, you have clearly not abandoned your Australian home and the fact that you have maintained that home and made use of it during return visits to Australia lends significant weight to the conclusion that your Australian home is your 'fixed and habitual place of abode'. There are several other factors that support this conclusion and these include (but are not limited to) the facts that: · your assets in Australia are more significant than your assets overseas, · the majority of your personal belongings and household effects remain stored at your Australian home, · you have chosen not to be removed from the Australia electoral roll because you want to continue to vote in Australian elections, and · you have retained significant professional links in Australia, as well as social connections with friends and relatives in Australia. Secondly, and equally as important is the fact that between 1 July 2013 and 30 June 2015, you will have such a level of continuity of association with Australia, coupled with the likelihood that you will return to Australia and an apparent attitude that Australia remains your home (see our discussion about your residency status under the 'resides' test in support of these statements), that it is impossible to conclude your overseas home is anything but a place where you are living temporarily while working overseas away from your 'fixed and habitual place of abode' in Australia. In view of the above, the Commissioner is not satisfied that you will have a permanent place of abode overseas between 1 July 2013 and 30 June 2015. Accordingly you will be a resident of Australia for taxation purposes under the domicile test between 1 July 2013 and 30 June 2015. | Detailed Reasoning - Conclusion: You will be a resident of Australia for taxation purposes from 1 July 2013 until 30 June 2015.