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

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

Relevant facts and circumstances: You are an Australian citizen. You country of origin is Australia. You departed Australia for Country X in the relevant year. You do not have a spouse or children. You intend to live in Country X on an ongoing basis. You have a visa which allows you a maximum stay in Country X of 2 years. You have a job being held for you in Australia. You have employment in Country X with a term of employment of 2 years. The company is an international arm of the company you work for in Australia. You sold all your household effects prior to your departure. You have not removed your name from the electoral role and intend on voting in the upcoming election. 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. At the time of departure you indicated on your passenger card that you were departing on a temporary basis. You have no social or sporting connections in Australia. You do not hold a return airline ticket. You are living in share house accommodation in Country X. You have cancelled your Australian health insurance policy.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(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, and · the superannuation test. 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. Recent case law decisions have expanded on the list of factors identified in Taxation Ruling TR 98/17 : Income tax: residency status of individuals entering Australia . Case 5/2013 [2013] AAA 394; 2013 ATC 1-054 (Case 5/2013) and Sneddon v FC of T [2013] AATA 516; 2012 ATC 10-264 (Sneddon's case), for example, considered the following factors in relation to whether the taxpayer resided in Australia: (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. Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1) of the ITAA 1936. | Detailed Reasoning - (i) Physical presence in Australia: As indicated in Iyengar v FC of T [2011] AATA 856; 2011 ATC 10-222 (Iyengar's case), there is a requirement that you at least be physically present in Australia for part of an income year. You have been present in Australia until you departed for Country X in the relevant year. You were born in Australia and are an Australian citizen; you have been living and working in Australia up until your departure. | Detailed Reasoning - (ii) Nationality: While you are an Australian citizen, this is not in itself sufficient to establish that you are an Australian resident for tax purposes. | Detailed Reasoning - (iii) History of residence and movements: You have had a history of living and working in Australia with little movement beyond that. | Detailed Reasoning - (iv) Habits and "mode of life": Unlike the taxpayers in Iyengar's case and Sneddon's case who worked overseas after accepting offers from new employers, you moved to Country X with your existing Australian employer. You have not had your name removed form the Australian electoral and intend on voting in the upcoming election which is indicative of you no longer residing in Australia. You have a job being held for you in Australia. At the time of departure you indicated on your passenger card that you were departing on a temporary basis. You have rented an apartment in Country X purchased a bike and have sold all your Australian assets. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You have not returned to Australia since you departed, Australia. Your visa is only valid for 2 years. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: As indicated above, the reason for your absence from Australia is employment. You hold a two year visa and an employment contract for 2 years. | Detailed Reasoning - Family: It is significant that in the recent decisions regarding the residency status of persons working overseas, the taxpayers had both a spouse and children residing permanently in Australia. There is particular emphasis placed in these decisions on the taxpayers' Australian residence being the 'family home'. The Macquarie Dictionary defines 'family' as: · parents and their children, whether dwelling together or not. · one's children collectively. · any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins. By contrast, you do not have a spouse or children. Thus, you do not have a 'family' that resides in Australia in the same way as the taxpayers in the cases recently considered. However, of course, your extended family comprising of your other family members reside in Australia as previously noted. | Detailed Reasoning - Business or economic: In terms of 'business' or economic ties, you entered into a new employment arrangement involving two year contracts. Your employer in Country X is the same employer as you had while you were working in Australia; you also have a job on hold for you in Australia. | Detailed Reasoning - (viii) Maintenance of place of abode: You rented an apartment in Australia, which you vacated when you relocated to Country X. You have no place of abode whin Australia. | Summary: Based on the factors listed above, we consider that you were residing in Australia. You have a 'continuity of association' with Australia as you have a job being held for you in Australia; you have a visa which allows you a maximum stay in Country X of 2 years; at the time of departure you indicated on your passenger card that you were departing on a temporary basis and you have not removed your name from the electoral role and intend on voting in the upcoming election. You are residing in Australia according to the ordinary meaning of the word. Therefore, you are a resident of Australia under this test. | Detailed Reasoning - The domicile 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. Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. 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. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Australia because you were born in Australia and you are a citizen of Australian citizen. You have made no attempt at giving up your Australian citizenship or taking up citizenship of Country X. | Detailed Reasoning - Permanent place of abode: 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. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; (c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayer's presence in the overseas country; and (f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. In your case, the Commissioner is not satisfied that you have a permanent place to of abode outside of Australia for the following reasons: · You are living in shared rental accommodation in Country X. · Your visa in Country X is for a maximum period of 2 years. · You have a job being held for you in Australia. · 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 removed your name from the electoral role and intend on voting in the upcoming election. · At the time of departure you indicated on your passenger card that you were departing on a temporary basis. Therefore, as your domicile is Australia, and the Commissioner is not satisfied that you have a permanent place of abode outside of Australia, you are a resident of Australia under this test. | Detailed Reasoning - Your residency status: As you meet the Resides test and the Domicile test, you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.