Private ruling: Residency
Published: March 2014
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: No

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. Your work history has involved you moving internationally to undertake projects. You are considering accepting an employment contract with a foreign company where you will be based in Country X. You will pay tax on your earnings in Country X. The job will be a rotational assignment of 28 days on, 28 days off where your employer will fly you to a destination of your choice. Your employment contract is for two years with an option to extend. You intend to work for the company for as long as possible and they have secured project contracts until the end or 20XX. You have a spouse and a child. Your spouse is from Country Y and has extended family there. You intend to move to Country Y with your family in 20YY. Your child will attend school in Country Y. Your spouse owns an apartment in Country Y and you will initially live there. You will enter Country Y on a spouse visa and the duration of the visa is determined by local authorities after you have arrived. You understand the spouse visa is for three years and then reviewed. Your assets in Australia include two properties you own with your spouse, you live in one and the other is rented out. Both are mortgaged. You will rent out your house when you move to Country Y. You will leave large household effects at your house as a furnished apartment will achieve better rental income. You have no plan to return to Australia in the future. You may return for a holiday or to check on your rental properties. When you work in Country X you will live in share accommodation owned by your employer. You will live in Country Y with your family when you are off work during rotational shifts. Neither you nor your spouse have ever held a position with the Commonwealth Government of Australia. Assumption(s)

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

Reasons for decision: Detailed Reasoning - Residency: 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | 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 TR 98/17 Income Tax: residency status of individuals who enter Australia , and Taxation Ruling IT 2650 Income Tax: residency status of individuals who temporarily live outside Australia. Taxation Ruling TR 98/17 states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. 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 - (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 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 are planning on moving overseas permanently with your spouse and child in 20XX. You have no intention to return to Australia other than holiday visits. | Detailed Reasoning - (ii) 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. • Your country of origin is Australia and you are an Australian citizen. | Detailed Reasoning - (iii) History of residence: You currently live in Australia and plan to move to Country Y in 20XX. You stated that you have moved internationally in the past to undertake projects. | Detailed Reasoning - (iv) 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. • You are moving to Country Y with your spouse and child and you will work in Country X were you have been offered a two year contract • Your spouse is from Country Y and has family there • You will live in an apartment in Country Y owned by your spouse • Your child will attend school in Country Y • You will work in Country X for 28 days then return to Country Y on your 28 days off. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Once you have re-located to Country Y you do not intend to return to Australia other than for short holiday visits or to check on rental properties. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: If you do return to Australia it will be for short holiday visits or to check on rental properties. | Detailed Reasoning - (vii) 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 and child will be moving to Country Y with you. | Detailed Reasoning - Business or economic: Assets in Australia • You have two properties Assets overseas • You do not have any assets in Country Y at this stage. Your spouse owns an apartment. | Detailed Reasoning - (viii) 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 jointly own with your spouse two properties in Australia, one is rented out and one you live in. You will rent out your property when you move to Country Y. It will be rented out on a furnished basis as this will achieve better rental income for you. | Detailed Reasoning - Summary - resides test: You will not be residing in Australia due to the following factors: • You are moving to Country Y with your spouse and child for an indefinite period of time • You will live in an apartment in Country Y owned by your spouse • You will travel home to Country Y during your rotational shifts from working in Country X • Your child will attend school in Country Y • You will rent out your property in Australia • You have no intention to return to Australia in the future other than for short holiday visits or to check on your rental properties In consideration of the factors outlined above, you will not be residing in Australia according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the 183 day test, superannuation fund test and domicile and permanent place of abode tests. | Detailed Reasoning - Domicile and permanent place of abode: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. IT 2650 states that: Persons leaving Australia temporarily would generally 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. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. Application to the your circumstances Your domicile is Australia because your country of origin is Australia and you are still an Australian citizen. Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - Permanent place of abode: 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. 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; iii. 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; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. 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. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Consideration of these factors: • You intend to live in Country Y for an indefinite period of time and you have no plan to return to Australia permanently in the foreseeable future. • The purpose of you moving to Country Y is to take up an employment contract of two years or more where you will be based in Country X. • Your spouse and child are moving to Country Y with you. • You will rent out your property in Australia when you move overseas. • You will live in an apartment in Country Y which is owned by your spouse. • You will advise Medicare and Australian financial institutions that you are moving overseas. The Commissioner is satisfied that you will have a permanent place of abode outside of Australia. | Detailed Reasoning - 183 day: 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. • As you will not be in Australia for more than one-half of the relevant income year this test is not relevant to your circumstances. | Detailed Reasoning - Superannuation fund test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. As you and your spouse have never been employees of the Australian government, the superannuation test does not apply to your circumstances. | Detailed Reasoning - Conclusion - your residency status: As you do not meet any of the above tests, you are not a resident of Australia. Your assessable income only includes income gained from sources in Australia.