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

Ruling: Question and answer | Will you be a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: You are an Australian citizen. Your country of origin is Australia You have not been granted permanent residency by any country. Prior to your departure: • you lived in Australia • you and your spouse were traveling • you then returned briefly to Australia • you moved to a foreign country. You entered a foreign country on a visa which does not allow you to stay permanently. You do not hold a return airline ticket. You have not come back to Australia for any period since first leaving Australia for a foreign country. Your overseas employer has not provided you with accommodation. You live in rented accommodation. You have supplied a copy of your lease agreement. The assets you have overseas are a car and a joint bank account. Prior to leaving Australia you lived in rented accommodation or stayed with relatives and friends. Your assets in Australia are: household effects, three joint bank accounts and a credit card. Some of your household effects in Australia are stored at our families' homes; some are being used by other family members and some have been taken with you to a foreign country. Regarding your employment: • You are employed in Australia on a contract. You have supplied a copy of your contract with them. This contract provides you with an overseas visiting research position in a foreign country. This is then followed by a period back in Australia. • For the overseas position, you have another contract. You are employed as a post-doctoral scholar. You have supplied a copy of your contract with them. This position could be extended; subject funding and performance. Your social and sporting connections with Australia are your close relationships with your family and friends. Your social and sporting connections with a foreign country are a small social network. However, it is much less significant than your social network in Australia. Neither you nor your spouse is or was a Commonwealth Government of Australia employee for superannuation purposes. You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted. You have not advised any Australian companies with whom you have investments that you are a foreign resident. You have not advised Medicare to remove your name from their records. You have suspended your private health insurance. You have filed tax returns in a foreign country. You paid taxes. You have provided copies of your tax statements. You cannot remember whether you stated that you were leaving temporarily or permanently as the reason for going overseas, when completing the Australian Immigration Outgoing passenger card.

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: 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 • 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 (IT 2650) . 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: (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 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 - (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 employed in Australia on a contract from. This is an Australian based position. This contract provides you with an overseas visiting research position. This is then followed by a period back in Australia. For the overseas position, you have another contract. This position could be extended subject funding and performance. However, you remain employed by your Australian employer and are paid by them. They also pay your superannuation and a living away from home allowance. Your visa does not grant you permanent residency status in a foreign country. You intend returning to Australia. | 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. You were born in Australia and you are an Australian citizen. | Detailed Reasoning - (iii) History of residence and movements: You departed Australia for a foreign country. You have gone there for employment purposes but will return Australia. You have not come back to Australia for any period since first leaving Australia for a foreign country. | 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 employer is Australian. You have gone to a foreign country for employment purposes but remain an employee of and are paid by them. In a foreign country, you live there in rented accommodation. You will return to Australia. | Detailed Reasoning - (v) 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 period of two years and seven months to be residing in Australia. You have not come back to Australia for any period since first leaving Australia for a foreign country. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You have gone to a foreign country for employment proposes. You have not come back to Australia for any period since first leaving Australia for a foreign country. | 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: You have family in Australia. You live with your spouse in a foreign country. | Detailed Reasoning - Business or economic: You work in a foreign country but are paid by your Australian employer. | Detailed Reasoning - Assets: Your assets in Australia are household effects, three joint bank accounts and a credit card. The assets you have in a foreign country are a car and a joint bank account. | 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 lived in rented accommodation in Australia and then stayed with relatives and friends, until you left for a foreign country. You live in rented accommodation in a foreign country. | 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 moved gone to a foreign country for employment purposes but remain an employee of your Australian employer and are paid by them. • You entered a foreign country on a visa which does not grant you the right of permanent residency. • In a foreign country, you live there in rented accommodation. • You will return to Australia. 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. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are 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 - The domicile and permanent place of abode 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: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. As you are still an Australian citizen while living in a foreign country, your domicile is Australia and remains unchanged. | 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. 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. In your case, you have not been granted permanent residency in a foreign country and you live in rented accommodation. You will return to Australia. You have not established a permanent place of abode in a foreign country as your presence there is temporary in nature. You cannot establish a permanent place of abode when your presence in a place is temporary. The Commissioner is not satisfied you have a permanent place of abode outside of Australia. Therefore, you will be a resident of Australia under the 'domicile and permanent place of abode' test of residency. As you are a resident of Australia under the resides (ordinary concepts) test and the domicile and permanent place of abode test, there is no need to consider the 183 day test and the superannuation test. | Detailed Reasoning - Your residency status: As you are a resident of Australia under two of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are considered to be an Australian resident for taxation purposes for the income year.