Private ruling: Residency for tax purposes
Published: September 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Questions and answers: | 1. Are you a resident of Australia for taxation purposes? | Yes. | 2. Is the income you earn in country Y assessable in Australia? | Yes.

Relevant facts and circumstances: You were born overseas and you are a citizen of Australia. You work in country Y. You have worked for the same employer for a number of years. You started work in country Y in an earlier year. In a later year, you started going to country Z to live with your de facto spouse and their children. It is your intention to live in the overseas country on a permanent basis but currently your visa does not allow this. You do not have permanent residency of any other country (other than Australia). You have a work visa for the country you work in (country Y) and a visitor's visa for the country Z. You can stay x days in country Z. You work a set time on and set time off in country Y. You live in employer provided camp style accommodation in country Y. You live in a rented property in country Z with your de facto spouse. You come back to Australia to visit your family, parents and children for no more than a couple of weeks at a time. You have not exceeded 150 days in Australia since leaving. You do not own any assets in country Y. You own household affects in country Z. You own a car in Australia which your child uses. You lived with your parents prior to going to country Z. You no longer have household affects in Australia. You have a bank account in Australia which your income from your work is deposited. Tax is withheld from your work income and paid to the ATO. You have a private health insurance policy which provides world-wide cover. You have not notified the electoral commission or Medicare that you are living overseas. The last time you left Australia you listed on your outgoing passenger card that you were a resident of Australia as you did not know what the tax consequences of putting anything else. Neither you nor your spouse are currently or have ever been Commonwealth Government employees.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 test · the 183 day test · The superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia. 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 (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: · 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 to different countries · 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 IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia . 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 - 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 have worked in country Y for a number of years. In a later year, you started travelling to country Z to live with your de facto spouse. You work set time on and set time off in country Y returning to country Z. You are only able to stay in country Z where you live for x days at a time. You visit family in Australia and do not exceed 150 days in any financial year. | Detailed Reasoning - 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. You are an Australian citizen. You do not have permanent residency of any other country. | Detailed Reasoning - 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 work in country Y on a set time on set time off basis and live in employer provided camp style accommodation. You spend only x days every second month in country Z due to restrictions on your visa. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. 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, for example the 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 return to Australia to visit your family for no more than a couple of weeks at a time. You have not exceeded 150 days in a financial year with your family in Australia. | Detailed Reasoning - Purpose of visits to or absences from Australia: As discussed above you return to Australia to visit your family still living in Australia. When you are not in Australia, you are either working in country Y or with your de facto spouse in country Z. | Detailed Reasoning - 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: You have family living in Australia. You have a de facto spouse in country Z. | Detailed Reasoning - Business or economic ties: You work in country Y and have worked for the same company for a number of years. | Detailed Reasoning - Assets: You have a car registered in your name and used by your child in Australia. You do not have any assets in the country where you work. You only own household affects in country Z. | Detailed Reasoning - 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 do not have a place of abode in Australia. You do maintain a place of abode in country Z, but you are only there for short periods of time as you are not able to stay in country Z for more than X days at a time. | Summary: As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically; · you can only be in country Z for x days at any one time and then you are required to leave; · you are an Australian citizen and you do not have permanent residency of any other country; and · you only have an employment visa for country Y and a visitor's visa for country Z. Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period. | Detailed Reasoning - Assessable income: 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. In your case, as you are a resident of Australia for tax purposes, your assessable income includes income gained from all sources both inside and outside Australia (including the income you earn in country Y).