Private ruling: Residency
Published: February 2014
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: You were born in Australia and you are a citizen of Australia. You are not a permanent resident of any other country. You have gone to Country Z. You and your spouse have started a foreign investment company in Country Z. The Country Z government have approved the establishment of the foreign investment company You have a residence visa and work permit for Country Z. The visa and permit are contingent on the company remaining in existence. They will be renewed annually if the company remains in existence. A house has been purchased on your behalf in Country Z and you have a written agreement with the legal owner as per Country Z law. You have family and friends remaining in Australia. You have friends and social connections in Country Z. You do not have any assets in Australia. You ceased running a wholesale business in Australia. You have returned to Australia x times since leaving. You and your spouse have not been a Commonwealth Government employee. You are over 16 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | 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. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. 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 considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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 with Australia compared to the foreign country concerned; and (viii) Maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note 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. Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62): Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1. You and your spouse have gone to Country Z and started a foreign investment company. You have returned to Australia x times since leaving. Although you will not be physically present here while you are in Country Z, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above. | Detailed Reasoning - (ii) Nationality: You were born in Australia and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence and movements: You and your spouse lived in Australia and ran a company prior to going to Country Z. | Detailed Reasoning - (iv) Habits and 'mode of life': You intend on staying in Country Z to live and run your foreign investment company. You have a residence visa and work permit for Country Z. The visa and permit is required to be renewed annually and is contingent on the company remaining in existence. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You have returned x times to Australia since leaving. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: The purpose of your absence from Australia is to live and work in Country Z, subject to future visa approvals and extensions. | Detailed Reasoning - Family: Your spouse has accompanied you to Country Z. | Detailed Reasoning - Business or economic: As mentioned above you have started a foreign investment company in Country Z. You had a wholesale business in Australia. | Detailed Reasoning - Assets: You no longer have any assets in Australia. You have started a foreign investment company in Country Z and you do not own any property in Country Z. A house has been purchased on your behalf, and although there is an agreement with the legal owner, you do not hold legal title to the house. | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: You are not maintaining a home in Australia. | Detailed Reasoning - Summary of the resides test: As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning. In your case, although you intend to be physically absent from Australia, there are various factors that indicate that you have not ceased to be a resident of Australia. These are primarily: · you have a restrictive visa whereby your ability to live in Country Z is dependent on your continuing foreign investment company remaining in existence; · you are an Australian citizen; · you do not have significant assets in Country Z · a house has been purchased on your behalf in Country Z but due to the law in Country Z, you do not hold the legal title to the house. Based on the above, you will retain a continuity of association with Australia while you are overseas and will be residing in Australia according to the ordinary meaning of the word. Therefore, you are a resident of Australia under the 'resides' test of residency. 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 test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may also adopt a 'domicile of choice'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country by applying for permanent residency or citizenship. Your domicile of origin is Australia. You have not proven an intention to change your domicile as you are not a permanent resident or citizen of any other country. 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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia for the following reasons: · you have a Country Z residence visa and work permit which only allows you to be in Country Z while the foreign investment company is in existence · you are not able to purchase property in your own right in Country Z due to their laws Your accommodation in Country Z is not permanent as your presence in Country Z is contingent on the foreign investment company being in existence. If your visa and permit are not renewed by the Country Z Government then you are not able to be present in Country Z and are required to leave. You are a resident under this test. As you meet the resides and domicile tests of residency, you are a resident of Australia for tax purposes.