Private ruling: Your residency status
Published: February 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: On or after 1 February 2013

Ruling: Q1: Are you are resident of Australia for taxation purposes from when you departed Australia? | A1: Yes.

Relevant facts and circumstances: Your country of origin is country X. You and your family left country Z more than 20 years ago. You were taken to country Y for a few years and then you were sponsored to Australia by a relative under family reunion status. You became a citizen of Australia a few years later and you have an Australian passport. You left Australia during the relevant financial year and relocated your family to country X. Your spouse had to resign from their long term employment. You sold all of your cars. You have several houses in Australia all of which are being rented out. All are with real estate agencies except for one. Your parents have been living with you at this house where you have set up a private agreement/lease with them. They are leasing out their own house. You have advised your financial institutions of your new overseas address. You and your spouse have deregistered from the Australian Electoral Roll. Correspondence from the Australian Electoral Commission confirms that neither you nor your spouse are entitled to remain enrolled and that your names have been removed from the electoral roll. You have closed down all utility accounts. You requested your private health insurer to cancel your health insurance but they advised you that suspending and cancelling from their perspective is essentially the same thing. The only advantage in suspending is that the health insurer can quickly reactivate your account if you ever return to Australia. You have advised Medicare of your new overseas address. You stated that you were leaving permanently on your Australian Immigration Outgoing passenger card. You have a lease in excess of 12 months on a property in country X that expires during the relevant financial year. The lease states that if you want an extension beyond the expiry date, you must give at least two months' written notice. It also states that you need to give 30 days' notice in writing to terminate the lease. You have a two year lease on a rental car in country X. You have opened a new bank account in country X. You have documentation that allows you to live in country X. The documents are tied to the sponsor company and renewed each year. If your employment contract runs out and you find new work with another company, that company applies for new documentation on your behalf. The basic principal is that on completion of your employment contract you have a set period to find work by flying over to country Y and then back to country X to get a visa. Alternatively you can find work in another country. Your children are attending schools in country X. We have notified your shareholding registry of your non-resident status to withhold appropriate tax. You and your spouse are not Commonwealth government employees. You have a contract to work in country X with an expiry date during the relevant financial year. Your employer will pay you an accommodation allowance to cover accommodation and utilities expenses. Your employer will reimburse your children's entry fees, basic tuition fees and transports costs to and from school. All necessary visas and permits were organised by the company for you and your family. Once the current project is completed you have no intention of moving back to Australia. You are planning to apply for other jobs either in country X or in other countries. You are paying tax in country X. You will be starting a new employment contract in country W commencing during the relevant financial year. You plan to return to Australia for one week for a holiday. You have not maintained any social and/or sporting connections with Australia. Your parents remain in Australia. Due to your work commitments and language barrier you have not formed any social or sporting connections in country X.


Reasons for decision: Summary: Section 6 of the Income Tax Assessment Act 1936 (ITAA 1936) provides four exhaustive tests to determine the residence of individuals. In summary, you will be a resident of Australia for Australian domestic tax purposes if any of the following tests is satisfied: (1) you are a resident of Australia according to ordinary concepts (according to the ordinary meaning of the word 'resides'); (2) you are domiciled in Australia unless the Commissioner is satisfied your permanent place of abode is outside Australia; (3) you have been in Australia for more than one-half of the income year (i.e. in excess of 183 days) unless you can satisfy the Commissioner that your usual place of abode is outside Australia and that you do not intend to take up residence in Australia; or (4) you are a member of certain Commonwealth government superannuation schemes or you are a spouse or child under 16 of such an individual. The primary test for deciding your residency status is whether you reside in Australia according to the ordinary meaning of the word 'resides'. The following factors are examined to reach a conclusion on this issue: · where is your usual place of abode, · the location of your family, · where your personal effects are kept, · the purpose, frequency and duration of visits to Australia, · your nationality and citizenship, and · your social ties with Australia. In the AAT case Pillay v FC of T [2013] AATA 447 the taxpayer was born in South Africa and was an Australian citizen. He was a doctor who had been working in East Timor since 2006. Since then, he was physically present in East Timor for between 9 and 11 months each year, and between 6 to 8 weeks in Australia each year. When in East Timor, the taxpayer stayed in a self-contained apartment supplied by his employer. Together with his wife, he purchased a property in Bali which they called home. They also owned a property in Sapphire Beach in Australia, which was left vacant for most of the time and appeared to be occupied only during the few weeks of the year when the taxpayer was visiting Australia. During his visits to Australia, the taxpayer divided his time between the Sapphire Beach property and visiting his children and grandchild. The taxpayer had Australian bank accounts which he used to meet his living expenses. Further, there were circumstances to indicate that he intended to divide his time between Bali and Australia when his employment in East Timor ends. In October 2011, the taxpayer sought a private ruling from the Commissioner as to whether he was a non-resident during the income years between 2009/10 and 2011/12. The Commissioner ruled that the taxpayer was a resident of Australia during the relevant years because he had maintained a continuity of association with Australia in the relevant years despite being physically absent for significant periods. The taxpayer submitted that he had a permanent place of abode in East Timor and that he was a non-resident of Australia. The AAT affirmed the Commissioner's decision due to the taxpayer's continuity of association that he held with Australia. Although he had been working for an extensive period in East Timor and although he had an apartment to stay in while he had been working there, he did not seem to have brought himself to regard East Timor as home. Indeed he and his wife regarded the Bali property as home, despite the fact that they had little time to spend there, together. His connection with East Timor appeared to be one based almost entirely on his employment arrangement. He did not express an intention to remain in East Timor after his employment ended. Rather, he expressed an intention to divide his time between Bali and Sapphire Beach which did not indicate a break in his ties with Australia. | Detailed Reasoning - Physical presence: Your own physical presence in Australia since you departed will be limited to a one week holiday to visit your family. In Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248 and Keil v Keil [1947] VicLawRp 56; [1947] VLR 383) it was stated that a person does not necessarily cease to be resident because he or she is physically absent. The test is whether the person has retained a 'continuity of association' with the place ( Levene v Commissioners of Inland Revenue [1928] UKHL 1; [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149) together with an intention to return to that place and an attitude that that place remains 'home'. You state that you do not intend to return to Australia and you will be moving on to country W to commence a new employment contract. | Detailed Reasoning - Nationality: You were born in country Z. You and your family left country Z .You were rescued and taken to country Y for a few years and then you were sponsored to Australia by your relative under family reunion status. You became a citizen of Australia a few years later and you have an Australian passport. | Detailed Reasoning - Maintenance of a place of abode: You have ownership interests in several properties in Australia, including the property that was your family home before you departed. Your parents were living with you in your family home and they are renting the home from you under a private lease arrangement in your absence. | Detailed Reasoning - Family and business ties with a country: Family or business ties with a country are an important factor to be taken into account in determining whether or not a person has ceased to be resident in a particular country. In Australia, family ties outweigh business ties where the two are in conflict ( Shand v FC of T 2003 ATC 2080). The location of an individual's immediate family can be decisive ( Joachim v FC of T 2002 ATC 2088). Your parents remain in Australia, renting your family home and your spouse and children have accompanied you to country X. | Detailed Reasoning - Results of the resides test: In view of the decisions arising from recent case law, the Commissioner believes that you remain a resident of Australia for taxation purposes because you have maintained a 'continuity of association' with Australia for the following reasons: · You have not indicated that you will be seeking to change your citizenship. · You were sharing your family home with your parents before you departed Australia and you have a private lease arrangement in place for them to continue living there. It would therefore be feasible for you to return to live there without difficulty at any time. · Notwithstanding your statement that you do not intend to return to Australia to live, you have indicated that it is your intention to travel and seek work in other countries; not to settle in any one place to call home. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you 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 - Domicile: The first of the three specific tests in the definition of resident in section 6(1) of the ITAA 1936 requires you to be domiciled in Australia. There are essentially three types of domicile: · domicile of origin; · domicile of choice; and · domicile of dependency. Broadly, your domicile of origin is where you were born, or the country of your father's permanent home. In order to show that you have chosen a new domicile of choice in a country outside Australia, you must be able prove an intention to make your home indefinitely in another country. There must be both the act and the intention to select a new jurisdiction as your permanent home, for example, applying for permanent residency in another country. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind. For a domicile of choice to be acquired, the common law requires that there be both a change of residence and the intention of residing in the new country permanently or at least indefinitely. The requisite intention without a change of residence, or a new residence without the necessary intention is not sufficient for the acquisition of a new domicile and in either case would suffice for the retention of the existing domicile. A move to another country without intending the removal to be permanent is of no effect ( Jopp v Wood (1865) 4 De GJ & S 616), while a mere intention to move permanently to another country without actually doing so is equally ineffective ( Munro v Munro (1840) 7 Cl & F 842). If a person claims that he or she has acquired a domicile of choice, the onus lies on that person to prove by clear and cogent evidence that the change has taken place. In this regard, it must be shown that the person has abandoned the previous domicile with the intention of remaining permanently or indefinitely in the country of the new domicile ( Bell v Kennedy ; Udny v Udny ; Fremlin v Fremlin ; Terrassin v Terrassin ). Your domicile of origin is country Z as you were born there. Your domicile of choice is Australia because you and your family became Australian citizens after your relative sponsored you. You have retained your Australian domicile as you have not indicated an intention to make your home indefinitely in any one country. Rather, you have indicated that you will travel wherever there is suitable work available for you. We therefore need the Commissioner to be satisfied that you established a permanent place of abode outside Australia. Permanent place of abode", according to Fisher J (79 ATC at 4317; 9 ATR at 910-911), is: ..."the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place". The word 'permanent' does not have the meaning of everlasting or forever but is used in the sense of being contrasted with temporary or transitory ( Applegate 79 ATC at p.4314; 9 ATR at p.907). Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia lists a number factors used by the Commissioner to assist in reaching a decision on an individual's permanent place of abode. These factors include: (a) the intended and actual length of the individual's stay in the overseas country; (b) any intention either to return to Australia at some definite point in time or to travel to another country; (c) the establishment of a home outside Australia; (d) the abandonment of any residence or place of abode the individual may have had in Australia; (e) the duration and continuity of the individual's presence in the overseas country; and (f) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer's children, family ties. You state that you do not intend to return to Australia and that you will be travelling to country W to take up a new employment contract. There is nothing that indicates your intention to live permanently in any one place. You have either an accommodation allowance or furnished accommodation included as part of your employment contracts. You secured a lease on accommodation in country X which can be terminated by giving 30 days' notice in writing. We have discussed above that your family home in Australia has not been totally abandoned as your parents are still living there and it is possible for you to return to the previous living arrangements you had before departing Australia. Although you have removed yourself from the electoral roll and notified various authorities and institutions of your new address, it is not evident that you are intending to establish a permanent place of abode in any particular place. | Detailed Reasoning - Results of the domicile/permanent place of abode test: The Commissioner is not satisfied that you have abandoned your domicile in Australia, neither is he satisfied that you have a permanent place of abode outside Australia. | Detailed Reasoning - Conclusion: You remain a resident of Australia for taxation purposes for the relevant years.