Private ruling: Residency for tax purposes
Published: September 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You entered into a contract with your Australian employer to work on a project in country X. You left Australia in early 20XX to commence work in country X. Your work in country X will extend beyond dd/mm/20XY. You have a work visa which allows you to work in country X. The work visa must be renewed annually. You are employed under Australian award conditions and your employer withholds tax from your salary. In country X you are staying in project provided accommodation that is available to all contractors' employees. There are limited work opportunities in Australia and you intend to remain working overseas after the country X project finishes. Future work opportunities exist in other overseas countries. You do not have a position or job being held open for you in Australia. You have no plans to return to Australia permanently. Since commencing work in country X, you have returned to Australia on a number of occasions to sell your residence and to visit family. You sold your Australian place of residence and you have no household effects in Australia. Your Australian assets comprise of an investment property, a vehicle and bank accounts containing a substantial sum. Your overseas assets comprise of sporting equipment. You do not have a spouse, partner or children. The only social connections you have with Australia are your parents and siblings. You have no sporting connections with Australia. Your sporting connections with country X comprise of memberships with sporting clubs. You have not had your name removed from the Australian electoral roll or Medicare records. You have retained your Australian private health insurance cover. You have not advised any Australian financial institutions that you are a foreign resident. You stated you were going overseas for employment reasons when completing the Australian immigration outgoing passenger card. You have never been employed by the Australian commonwealth government.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(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 gained 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. 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 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 test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd 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'. In considering the definition of 'reside', the courts have stated that the word ' reside' should be given the widest meaning. 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: (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. No single factor is necessarily decisive and some are interrelated. The weight given to each factor varies depending on individual circumstances. | Detailed Reasoning - (i) Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. 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 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 been working overseas since early 20XX and do not intend to return to Australia permanently. | Detailed Reasoning - (ii) Nationality: Your country of origin is Australia and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence and movements: Apart from a brief period overseas, you lived and worked in Australia for some time prior to your departure for country X. | Detailed Reasoning - (iv) Habits and "mode of life": You have been living and working in country X since early 20XX, and: · require a working visa to work in country X · must renew your working visa every 12 months to remain in the country; · are staying in project provided accommodation that is available to all contractors' employees; · are a member of local sporting organisations; · have made return visits to Australia to visit your family; · are employed by an Australian employer under Australian award conditions; · are receiving Australian sourced employment and rental income; · are having Australian tax withheld from your salary; · have retained your Australian private health insurance; and · have left your name on the Australian electoral role and Medicare records. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: 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. The Administrative Appeals Tribunal (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 have made a number of return visits of short duration to Australia prior to the current financial year and one visit to see your family since 1 July 20XY. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: The purpose of your absence from Australia is to work in country X. The purposes of your return visits to Australia have been to sell your residence and visit your family. | Detailed Reasoning - Family: You do not have a spouse or children; however, you have parents and siblings who live in Australia. You have returned to Australia to visit your family on one occasion since 1 July 20XY. | Detailed Reasoning - Business or economic ties: You currently work for an Australian employer under Australian award conditions, have Australian tax withheld from your salary and derive rental income from your Australian rental property. | Detailed Reasoning - Assets: Your Australian assets comprise of an investment property, a vehicle and bank accounts containing a substantial sum. Your overseas assets comprise of sporting equipment. | Detailed Reasoning - Maintenance of place of abode: You no longer have a place of abode in Australia following the sale of your residence. In country X you are currently living in project provided accommodation that is available to all contractors' employees. This is temporary accommodation directly related to your employment and cannot be described as a place of abode that is maintained by you. | Summary: As stated above, no one single factor is decisive, the weight given to each factor depends on individual circumstances, and the word 'reside' should be given the widest meaning. In your situation, you have been living and working in country X since early 20XX, have sold your Australian residence and do not intend to return to Australia permanently. However, there are various factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically, you: · are employed by an Australian employer under Australian award conditions; · are receiving Australian sourced employment and rental income; · have substantial assets in Australia; · have strong family ties to Australia; · have made return trips to Australia to visit your family; · have retained your Australian bank accounts and private health insurance; · have left your name on the electoral role and Medicare records; and · are not maintaining your own place of abode overseas. Despite your absence from the country, you have maintained a continuity of association with Australia and are residing in Australia in accordance with the ordinary meaning of the word. Therefore, you are a resident under the resides test of residency. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency. However, for the sake of completeness, your residency status under the domicile test of residency will also be considered. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Australia because your country of origin is Australia and you are an Australian citizen. You are working in country X on a temporary basis and have not taken any steps to establish a new domicile by becoming a permanent resident or citizen of that country. | Detailed Reasoning - Permanent place of abode: It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (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 your situation, you are working in country X on a specific employment project, your presence in country X is dependent on a working visa which must be renewed annually and you are looking to work elsewhere when your current employment finishes. You are also living in project provided accommodation that is available to all contractors' employees. This is temporary accommodation directly related to your employment and cannot be described as a place of abode that is maintained by you. Although you sold your residence in Australia and no longer have a specific place of abode here, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. Therefore, you are a resident of Australia under the domicile test of residency. | Detailed Reasoning - Your residency status: As you meet the resides test and the domicile test, you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.