Private ruling: Residency
Date of advice: 20 April 2016
Published: June 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2015

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

Relevant facts and circumstances: Your country of origin is Foreign Country A. You are a citizen of Australia. You are employed by a Foreign Country B company. You enter Foreign Country B on working visa which was supplied by your employer. The visa allows you to stay in the Foreign Country B for two years. Your employment is permanent but depends on whether your employer could find a suitable project in Foreign Country B for you. If there is no suitable project, you will be back to Australia. While in Australia waiting for the job, you are still employed by the same employer but without payment. Your family did not accompany you to Foreign Country B and you stayed in a hotel while doing project in Foreign Country B. You have a bank account and a car in Foreign Country B. Your children are currently studying in Australia, your spouse needs to stay in Australia and take care of them. You stay in your own house with your family while in Australia. You have investment properties, bank accounts, and a car in Australia. You leave your household effects and your personal effects in Australia. You did not intend to reside overseas permanently, your intention is to return and reside in 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 have suspended your private health insurance. You are not members of any clubs or associations in Australia, nor in Foreign Country B. 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 are employed a Foreign Country B employer; you enter Foreign Country B on working visa which was supplied by your employer and the visa allows you to stay for two years; you will be staying with your family in Australia while waiting for your project assignment; you stayed in a hotel while doing project for your employer and most of your assets including your family house, rental properties, bank accounts and a car are maintained in Australia; furthermore, you intention is to return and reside in Australia. Based on the facts, you are residing in Australia according to ordinary concepts. 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 tax 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, you were born in Foreign Country A; therefore, your domicile of origin is Foreign Country A. You became a citizen of Australia; therefore, your domicile of choice 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 stayed in a hotel while doing project in Foreign Country B. • Your visa only allows you to stay in Foreign Country B for 2 years. • Your family members are in Australia. 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 did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Therefore, you are a resident of Australia for taxation purposes.