Private ruling: Residency
Published: July 2013
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2012

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

Relevant facts and circumstances: You were born in Australia and are a citizen of Australia. You have children who live in Australia with your former spouse. You work for an international company with a head office in country Y. You originally expected to commence work on a new project in country Z in 2011; however the project was delayed. The delay resulted in you carrying out short term work based out of Australia in the interim. When you were based in Australia you lived in the house you own. You commenced work on the project in country Z in late 2012 and you expect your involvement to continue until late 2014. Following the project in country Z, your next assignment is likely to be in country W. You do not have a position or job being held open for you in Australia. You do not intend to return to Australia to work or reside permanently. In country Z, you stayed in guest house accommodation before moving to accommodation at the work site. The accommodation at the work site comprises of a flat that you furnished at your own cost. You do not have to pay any rent; however, you have to pay for food, power, cleaning and petrol for the vehicle you have use of. You have a multiple entry employment visa which allows you to work in country Z. The visa is current for one year and can be extended. You pay tax in country Z on your salary. You married your current spouse before you commenced work in country Z with the view that when you left Australia you would live together in the house you have together in country X. Your spouse is a citizen of country X by birth and lives and works full time in country X. You consider your home to be with your spouse in your house in country X where you keep your clothes, have access to a car and live whenever you are not working overseas. You are allowed entry to country X under the visa you have. This arrangement allows you unlimited entry and exit from country X along with stays of up to X days in length at any one time. Under the visa there are no restrictions over how much time in a year you spend in country X, as long as you travel out and back every X days. There are no restrictions on internal travel once you are in country X, however, you cannot perform work for recompense whilst in country X. You thought that this visa was a better option for you than another option as the industry you work in is all but closed in country X, and it is very unlikely that you will have a 90 day break from work in the foreseeable future. In the future you have some residency options to pursue such as dual citizenship. However, you consider that this option is not required at present due to the conditions of the visa you have. In your visits to Australia your passport has been stamped 'returning temporarily' on arrival and 'leaving permanently' on departure. You plan to return to Australia for a family holiday in late 2013. You will stay in holiday accommodation during this visit. Prior to leaving Australia in 2012 you rented out your house to long term tenants, sold your car and placed some furniture and personal effects in long term storage. You have cancelled your Australian private health insurance and had your name removed from the electoral role. Your Australian assets comprise of your house, investments in the Australian Stock Exchange (ASX), a bank account (in to which your salary is paid) plus furniture and personal effects in storage. Your overseas assets consist of your house in country X and household goods. You have a joint mortgage with your spouse over the house property. Neither you nor your spouse has ever been employed by the Australian commonwealth government.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 s ection 6-5 | Domicile Act 1982

Reasons for decision: Detailed Reasoning - Residency: 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, and · 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. Relevant to your situation are the resides test and the domicile test which are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . In examining these tests, IT 2650 provides a number of factors which assist in assessing a taxpayer's situation against the tests. A copy of this ruling is available from www.ato.gov.au. | Detailed Reasoning - The resides test: 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: · 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 with Australia compared to the foreign country concerned; and · maintenance of a place of abode. In your case, you were based in Australia with your employer until you left the country to work in country Z in late 2012. You rented out your Australian residence, sold your vehicle, placed your furniture in storage, cancelled your health insurance and had your name removed from the electoral role. Prior to leaving Australia, you had already established a home with your spouse in country X. You will return to Australia for a two week holiday in late 2013; however, you have no intention of working or residing in Australia again. Although you still maintain an association with Australia through your children and your assets, you have been living and working overseas on a continuous basis since late 2012 and will continue to do so. You have not been residing in Australia according to the ordinary meaning of the word since the date you left Australia. Therefore, you are not a resident of Australia under the resides test from late 2012. | 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 of origin is Australia because you were born in Australia. In regard to acquiring a new domicile, paragraph 21 of IT 2650 states that: Generally speaking, persons leaving Australia temporarily would 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. In your situation, you married a citizen of country X and you have a house together in country X that you call home. However, you have a restricted country X entry visa and have not yet taken any steps to obtain citizenship or permanent residency of country X. Therefore, your domicile is still Australia. | 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 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 case, you left Australia to work in country Z in late 2012. In regard to whether you have a permanent place of abode in country Z, we note that: · you are in country Z to work on a temporary basis for no more than two years; · you are staying in employee accommodation at the work site; · you have minimal assets in country Z; · your spouse is living in country X; and · the dwelling you call home is in country X. Therefore, the Commissioner is not satisfied that you have a permanent place of abode in country Z. In regard to whether you have a permanent place of abode in country X, we note that: · you married your country X spouse with the view that when you left Australia you would live together in the house you have together in country X; · your spouse is a citizen of country X by birth and lives and works full time in country X; · you consider your home to be with your spouse in your house in country X where you keep your clothes, have access to a car and live whenever you are not working elsewhere; · you do not intend to return to Australia to work or reside permanently; and · you have rented out your Australian residence, sold your vehicle, placed your furniture in storage, cancelled your health insurance and had your name removed from the electoral role. However, the continuity of your presence in country X is restricted by the country X visa you have. The time you can spend in country X is limited to a maximum of X days at a time and you cannot have a 'permanent' home in a country where the amount of time you can live is restricted in this manner. Therefore, the Commissioner is not satisfied that you have a permanent place of abode in country X or anywhere else outside Australia. Consequently, you are a resident of Australia under the domicile test of residency for the income tax years ending 30 June 2013 and 30 June 2014. | Detailed Reasoning - Your residency status: As you meet 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.