Private ruling: residency
Published: October 2013
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2012

Ruling: Question and answer: | Are you a resident of Australia for taxation purposes for the period you are in Country Y and Country Z? | Yes.

Relevant facts and circumstances: You and your spouse were born in Australia. You and your spouse are citizens of Australia. You have been given the roll of business manager for an Australian company. You are required to relocate to Country Y for this role. You left for Country Y a number of months ago. You will go to Country Z for work purposes after you complete your assignment in country Y and will be in country Z for 3 years and will extend this for a further number of years. You intend to be working and living outside Australia for X years. You intend on returning to Australia to live at the end of your assignments in Country Y and Country Z. Your spouse has accompanied you to Country Y. Your spouse will accompany you to Country Z. In addition to your salary you will receive the following: · an assignment allowance of 10% of your gross base salary; · a housing allowance; · a one-off relocation allowance; · reimbursement of moving expenses; and · reimbursement of one economy class return flight to Australia each year for each · of you and your spouse. You currently live in a fully furnished apartment in Country Y. You will have a home in Country Z. During your assignment you intend on returning to Australia for visits both personal and for business these visits will not exceed 35 days in any one financial year. You have a 12 month residents and work visa for Country Y. You will obtain a 12 month resident and work visa for Country Z which will be extended every 12 months. You intend on retaining your residence in Australia. This property will remain vacant. You will return to this property on your visits back to Australia. Your spouse will be making regular trips back to Australia for medical reasons and they will stay in the house during these stays. Your spouse returns to Australia on a regular basis for medical reasons. At the completion of the treatment your spouse will not return to Australia on a regular basis. You may sell the house at the end of your spouse's treatment. You have adult children who all live independently and will not accompany you to Country y or Country Z. You have resigned your position as managing director of your employer company. You are a share holder and director of a family trust. You currently have bank accounts in Australia. You intend on closing some of these accounts keeping one to maintain the property in Australia. xx% of your salary from your employment in Country Y is deposited into an Australian bank account for the upkeep of your Australian property. You have transported your personal items to Country Y which include sporting equipment and certain other items and these will go to Country Z with you. The remainder of your belongings not needed for day to day life remain in the house in Australia, these include, furniture, tools, cars etc. You have not notified Medicare that you have gone overseas as this is only required if you are leaving Australia on a permanent basis. You have arranged to have your name removed from the electoral roll. On your outgoing passenger card you are of the opinion that you ticked the box stating you were an Australian resident departing temporarily as the other option was Australian resident departing on a permanent basis and you base this on the fact you are returning in X years time. You put you were a visitor or temporary resident when you returned to Australia earlier this year on your arrival passenger card you intend on putting this on future arrival cards into Australia. You or your spouse have not been a Commonwealth Government employee.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Summary: 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 (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 first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 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: · 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 to different countries · 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 IT 2650 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. | Detailed Reasoning - Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this the AAT has stated that: Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there 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. You have gone to Country Y on a xx month assignment. At the end of the assignment in Country Y you will go to Country Z for x years. You intend on returning to Australia at the end of your assignment in Country Z. Your spouse has accompanied you to Country Y and will go to Country Z with you. 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 FC of T ( 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. You will return to Australia for no more than 35 days in any one financial year. Your spouse will return to Australia on a regular basis for medical treatment. We consider that the above facts indicate that you will maintain continuity with Australia for the financial years included in this ruling. | 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 one factor that is considered along with all of the circumstances of each case. You are a citizen of Australia and your spouse is a citizen of Australia. | Detailed Reasoning - History of residence: You have lived and worked in Australia for many years prior to going to Country Y. You worked for your current employer in Australia prior to taking the assignment in Country Y. | Detailed Reasoning - Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. Prior to taking up the assignment in Country y you worked for the same employer in Australia. You have gone to Country Y on a work visa and will obtain the same visa for Country Z. You return to Australia for no more than 35 days each financial year for personal and business reasons. Based on the above, we do not consider anything about your habits and mode of life during the financial years included in this ruling will be inconsistent with you being a resident of Australia for taxation purposes. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who 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 to be residing in Australia. You visit Australia for personal and business purposes for no more than 35 days in any one financial year. Your spouse returns every on a regular basis for medical treatment. 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 be a resident of Australia for income tax purposes. Considering the above, the duration of your return trips to Australia is not sufficient to preclude you from being a resident of Australia for taxation purposes in each of the income years included in this ruling. | Detailed Reasoning - Purpose of visits to or absences from Australia: You have gone to Country Y for work purposes. You will return to Australia for personal and work purposes for no more than 35 days in any financial year. Your employer provides reimbursement for air tickets back to Australia for both you and your spouse every year. | Detailed Reasoning - Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: Your spouse has accompanied you to Country y and will go to Country Z with you. Your children remain in Australia. It is significant that in the recent decisions regarding the residency status of persons working overseas, including Beizuidenhout , Case 5/2013 , and Iyengar's case , the taxpayers both had family residing permanently in Australia. There is particular emphasis placed in these decisions on the taxpayers' Australian residence being the 'family home'. The Macquarie Dictionary defines 'family' as: · parents and their children, whether dwelling together or not. · one's children collectively. · any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins. Consistent with the findings in Case 5/2013 and Iyengar's case and the definition of family provided by the Macquarie Dictionary the fact that your children will continue to permanently reside in Australia indicates the strength of your family ties to Australia. Your family ties in Australia are strong. | Detailed Reasoning - Business or economic ties: You have work in Country y on a xx month contract at the end of this contract you will go to country Z initially for x years and will extend it for a further x years. | Detailed Reasoning - Assets: You have a house, bank accounts and shares in a family trust in Australia. You have personal items and bank accounts in Country Y. Your case is simular to the taxpayer in the Iyengar's case where the taxpayer was found to be a resident of Australia for tax purposes. In that case the taxpayer did not purchase substantial property whilst overseas, but retained assets in Australia. | Detailed Reasoning - Maintenance of Place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You will maintain your home in Australia for the period you are in Country y and Country Z. This house will be available to you when you return to Australia on visits. | Summary: As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically: · you have a work visa for Country Y and will obtain a work visa for Country Z · you receive a housing allowance · you live in a fully furnished apartment in Country Y · you will maintain your home in Australia · you do not intend on leaving Australia on a permanent basis Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period. | Detailed Reasoning - 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. Your domicile of origin is Australia. You have not indicated that you have changed or are going to change your domicile. Your domicile is therefore Australia. 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. 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 have set up a permanent place of abode outside Australia for the following reasons: · you maintain a home in Australia · you return to this home when you return to Australia · your employer provides you with a housing allowance · you do not intend leaving Australia on a permanent basis You are a resident under this test. | Detailed Reasoning - The 183-day test: When a person is present in Australia for 183 days or more 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 are not a resident under this test as you do not intend being in Australia for 183 days or more in a financial year. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Only Commonwealth Government employees are eligible to contribute to the CSS and PSS. As you and your spouse were not a Commonwealth Government of Australia employee and you are over the age of 16 you will not be treated as a resident under this test. | Detailed Reasoning - Your residency status: You are a resident of Australia for taxation purposes