Private ruling: Residency
Published: July 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2013

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

Relevant facts and circumstances: You and your spouse were born in Australia and are citizens of Australia. You have been assigned to work in country X with your existing employer. The assignment is for a period of three years which commenced in Australia in early 20XX. You left Australia for country X with your spouse in mid 20XX. Your employment offer letter states that you will be repatriated to Australia on completion of the three year assignment period. Notwithstanding the three year term of the assignment, it is your intention to return to Australia no later than two years after your departure from Australia. This period may be even shorter if you do not enjoy country X. Your employment offer letter states that should there be no suitable role for you in Australia following your repatriation, a redundancy option will be made available to you. You have a visa which allows you to stay in country X. The visa does not allow you to stay permanently. You and your spouse plan to return to Australia at least twice per year for up to a month at a time to visit family. Your employment offer letter specifies that you and your spouse will be provided with round trip airline tickets between country X and Australia annually. You will live in rental accommodation while you are in country X. You have selected your own accommodation; however the lease is in your employer's name. Your accommodation is fully furnished and you will not need to purchase any household items or relocate any from Australia. Your employment offer letter states that you will receive a monthly housing allowance which will be paid direct to your landlord by your employer. You have opened a bank account in country X into which your salary will be paid. You will pay income tax in country X. Your Australian assets include your home, investment properties, superannuation, motor vehicles and bank accounts. You receive rental income from the investment properties. All your properties are mortgaged. Your mortgage payments are made from an Australian bank account and part of your salary will be used to top up the account to meet the payments. Your employer will make contributions to your Australian superannuation fund while you are in country X. You have left your Australian home untenanted and fully furnished so you can use it on your return visits to Australia. Your vehicles are also garaged at the property. You are a director of an Australian private company. Neither you nor your spouse are Australian Commonwealth government employees. You have not advised the Australian electoral office to have your name removed from the electoral roll. You have not advised Medicare to have your name removed from its records. You have suspended your Australian private health insurance as you and your spouse are covered by your employer's group policy. You have not advised any Australian financial institutions you deal with that you are a foreign resident.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(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' and 'permanent place of abode' test; • the 183 day test; and • the Commonwealth superannuation fund test. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation 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'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. 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 deciding cases of residency, the courts and tribunals have noted that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): 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. In your case, you have relocated to country X for work purposes and will live in rental accommodation with your spouse for the duration of your assignment. However, despite your absence from Australia, there are several factors which indicate that you will retain a continuity of association with Australia and will have not ceased to 'reside' here. These are: • you intend to return to Australia to live after a period of two years in country X; • you may have the option of continuing your employment with your Australian employer after your return; • you plan to return to Australia at least twice per year for up to a month at a time to visit children and family while you are based in country X; • your employment agreement provides you with two return trips to Australia annually and a repatriation flight to Australia at the end of your assignment; • you have not sold any of your Australian assets or placed any in storage; • you have left your home fully furnished and available for you to stay in on your return visits to Australia; and • you have not advised any Australian financial institutions you deal with that you are a foreign resident and have not had your name removed from the Australian electoral roll or Medicare records. While you are living in country X, you will retain a continuity of association with a place in Australia along with an intention of returning to that place and an attitude that the place remains home. Your situation is similar in some ways with the taxpayer in Dempsey v Commissioner of Taxation [2014] AATA 335 (Dempsey's case) in which the taxpayer was found to be a non-resident. In Dempsey's case, the taxpayer left Australia to work overseas and left his fully furnished house available for him to stay in on his return visits. However, unlike your situation, the taxpayer had an open ended employment contract for an expected period of three years and intended to continue working overseas indefinitely after termination of the contract. He spent more of his holiday time overseas than in Australia and never spent more than a few days at a time in his Australian home on his brief return visits. You will continue to reside in Australia according to the ordinary meaning of the word and will be a resident of Australia 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.