Private ruling: Residency
Date of advice: 26 June 2015
Published: June 2015
Ruling period: Year ending 30 June 201X | Year ending 30 June 201X | Year ending 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Question and answer | Were you an Australian resident for tax purposes whilst working overseas in Country A? | Yes.

Relevant facts and circumstances: You are an Australian citizen and you were born in Australia. You were living permanently in Australia in a rental property prior to your departure. You were offered a contract of employment in Country A with no fixed completion date. You left Australia for Country A with the intention of relocating overseas for approximately X years. You obtained a renewable 1 year business visa for Country A. Your employer provided you with an apartment for your sole use in Country A. Your spouse intended on accompanying you overseas. You rented an apartment in Country B with the intention that you would meet your spouse there on your month off for rest and relaxation, and as a base for travelling to other countries of recreation. You did not have a visa to enter Country B as it was not required for visits under X days. Unexpectedly your spouse was unable to join you overseas due to being required in Australia to attend to an ill relative who was expected to pass away. You working roster was X days on and X days off, and you returned to Australia during most periods off to support your spouse during this challenging time. You resigned from your position in Country A and returned to Australia permanently in 20XX. Although against your original intention your plans had been unexpectedly changed due to the ill health of your relative. You lodged your 20XX Australian tax return as a non-resident from the date you left to go overseas. Your overseas earnings were retained in an overseas bank account, with the intention of travel and purchasing overseas property, until your permanent return to Australia, where the funds were returned to Australia. You sold an Australian rental property you owned prior to leaving Australia. You have an Australian superannuation fund owned jointly with your spouse. You have bank accounts in Australia and you have advised your bank you are a non-resident. You jointly own furniture and personal effects in Australia. You own household effects in Country A. You employer lodged a tax return on your behalf in Country A. You have advised to be taken off the Australian electoral roll. You have maintained joint Australian private health insurance (overseas cover). You stated on the Australian Immigration Outgoing passenger card that you were an Australian resident who is leaving temporarily. You stated this under the assumption that you would return to Australia after relocating to Country A for X years.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 995-1

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation 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 it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, we consider that you were residing in Australia whilst working overseas in Country A because: • You maintained a rental property in Australia that your spouse lived in while you were away. • You maintained some household effects in Australia. • You returned to Australia during most of your periods of 30 days off to visit your wife. Your actions are considered to be those of a fly in fly out worker as you returned to your usual abode, Australia, during most periods you were not required at work overseas. The Commissioner is not satisfied that you were residing outside Australia according to the ordinary meaning of the word. Therefore, you are an Australian resident for tax purposes under this test. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile of another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. In your case, your domicile of origin is Australia. You have established a permanent place of abode outside Australia because: • Your spouse remained in Australia. • You returned to Australia during most of your periods of 30 days off to visit your spouse. • You did not hold a visa for Country B. • You did not hold a permanent visa for Country A. • You maintained some household effects in Australia where in the rental property where your spouse lived. The Commissioner is not satisfied that you have established a permanent place of abode outside Australia. Therefore, you are an Australian resident for tax purposes under this test. | Detailed Reasoning - Your residency status: As you meet the resides test and domicile test of residency, you are a resident of Australia for taxation purposes. You are required to declare all your income derived both in and out of Australia in your Australian tax return.