Private ruling: Residency
Date of advice: 19 September 2017
Published: February 2018
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 2015

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: Yes

Relevant facts and circumstances: You are an Australian citizen. You left Australia to take up an employment contract in the 2015 income year in Country Y. You hold a Country Y identity card. You hold an employment visa for Country Y which can be extended. You intend on applying for Country Y permanent residency when eligible. It was your intention to move to Country Y on a permanent basis. Your spouse and child have remained in Australia as your spouse at this stage is unable to secure work in Country Y. You and your spouse have been together for a number of years. You and your spouse were married in the 2016 income year overseas. You do not own any property in Australia. You do not have a bank account in Australia. You rent a property in Country Y. You took all your personal belongings to Country Y with you. You stay with your spouse in your parent-in-law’s home in Australia when you return to Australia. The sole purpose of your visits to Australia is to spend time with your spouse and child. You spent XX days in Australia during the 2017 income year. Your spouse intends on joining you in country Y in early 2018. You do not financially support your spouse or child. You pay tax in Country Y. You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | 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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: ● resides test ● domicile and permanent place of abode test ● 183 day test and ● Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | 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. ● You went to Country Y in the 2015 income year for work purposes. ● Prior to going to Country Y for work you lived with your spouse in Australia. ● You have a child with your spouse. ● Your spouse and child have not gone to Country Y with you. ● You do not financially support your spouse and child in Australia. ● You return to Australia to spend time with your spouse and child. Based on the facts above you are residing in Australia according to ordinary concepts. In the recent case of Iyengar v FCT 2011 ATC 10-222, the AAT held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. Your connection with Australia has not been broken because you are working overseas and have made trips back to Australia to visit your family. Your connection with Australia remains strong due to the fact that your family have remained in Australia. The connection remains strong even though you do not financially support your spouse and child. In your case you choose to work outside Australia in Country Y which is your reason for being overseas and you therefore remain a resident of Australia for taxation purposes. | Detailed Reasoning - Your residency status: You are a resident of Australia for taxation purposes for the period you are working in Country Y. You are required to declare your income derived in Country Y in your Australian tax return.