Private ruling: Residency
Published: December 2013
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2012

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

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You decided to take up an employment position in country X for a period of a couple of years. You entered country X with a multi-entry visa and were subsequently issued with a temporary residence card. You also have a work permit. Your employment contract is with an Australian company which has a presence in country X. Your initial discussions with your new employer were based on a couple of year stay in country X and you have signed a contract for about one year. You understand that this will most probably be extended at the end of the agreement. Any extension will most likely be a year by year arrangement. You have an employment position being held open for you with your Australian employer. You have a leave without pay arrangement for about 12 months and can apply for an extension if you wish. The arrangement is primarily a safety net should your employment in country X not work out in the initial stages. Prior to taking up the employment contract, you had never lived outside Australia except when on holiday. You plan to live in a rented property in country X for the duration of your planned stay. You have a rental lease on a property. Your employer has not provided you with accommodation in country X; however, for tax purposes your employer pays the rent monies from your salary each month. Your spouse and child are staying with you for about a year and they will then return to Australia. Your family will visit you for holidays until you return permanently from country X. Prior to leaving Australia for country X, you were living with your family in the dwelling you and your spouse own. Your dwelling will not be rented out while you are in country X. Your other child will be living in the dwelling while you, your spouse and other child are in country X. You currently do not intend on making any return visits to Australia during the period of your employment contract. However, if you did return it would be for a holiday of possibly two weeks duration. Your assets in Australia comprise of your dwelling, a vehicle, household effects, shares and bank accounts. You also have a housing loan. Your household effects remain in your Australian dwelling. You are currently remitting funds to Australia periodically to support your other child to look after the family home. The money is used to meet mortgage payments, gas, electricity, water, council rates, phone, internet, house and contents insurance, life insurance, income insurance, car insurance, car registration, vehicle maintenance and repair, gardener costs and general house upkeep. Your assets in country X consist of a bank account. Your social or sporting connections with Australia consisted of a social membership with a sporting club. You currently have no social or sporting connections with country X. You were previously employed by the Commonwealth Government of Australia and are a member of the CSS. You no longer hold a position with the government. Your spouse has never been an employee of the Commonwealth Government of Australia. You voted in the last Australian Federal election while you were in country X and have not advised the Australian Electoral office to remove your name from the electoral role. You have not advised any Australian financial institutions you have accounts with or companies you have investments with that you are a foreign resident. You have not advised Medicare to have your name removed from its records. You think you stated that you were going overseas for employment reasons when you completed the Australian immigration outgoing passenger card.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 subsection 995-1(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: · physical presence in Australia; · nationality; · history of residence and movements; · habits and 'mode of life'; · frequency, regularity and duration of visits to Australia; · purpose of visits to or absences from Australia; · family and business ties with Australia compared to the foreign country concerned; and · 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 - Physical presence in Australia: An intention to live or work overseas for an indefinite or unspecified period of time is more indicative of an individual no longer residing in Australia than someone who intends to return to Australia after a fixed period of time. 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 . [Emphasis added] 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. In your case, you will be working in country X for an expected period of a couple of years and intend to return to Australia to live when your employment ends. You have not made any return visits to Australia since you left for country X and you presently have no intention of making any return visits prior to your eventual return. However, if you did return to Australia during this period, it would be for a holiday of possibly a couple of weeks duration. Although it is possible you will not return to Australia and will not be physically present here while you are working in country X, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above. The test is, whether you have retained, or will retain, a continuity of association with a place in Australia, together with an intention to return to that place. | Detailed Reasoning - Nationality: You are an Australian citizen. | Detailed Reasoning - History of residence and movements: Prior to taking up your overseas employment contract you lived and worked in Australia. | Detailed Reasoning - Habits and 'mode of life': You have taken up an employment contract in country X for an expected period of a couple of years; however, you have an employment position with your Australian employer being held open for you through a leave without pay arrangement. You will live in a rented property in country X for the duration of your employment contract and your spouse and child are currently staying with you for approximately a 12 month period. They will then return to your family home in Australia. You voted in the last Australian Federal election while you were in country X and have not advised the Australian Electoral office to remove your name from the electoral role. You have not had your name removed from Medicare records and have not advised your bank that you are a foreign resident. These factors are indicators of your continuing association with Australia. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: As mentioned above, you have not returned to Australia since you left for country X and you currently have no intention of making any return visits to Australia prior to the end of your overseas employment. | Detailed Reasoning - Purpose of visits to and absence from Australia: The purpose of your absence from Australia is to work in country X for an expected period of a couple of years. | Detailed Reasoning - Family: Where the spouse and children of an individual reside during the individual's absence from Australia is a significant factor in deciding whether an individual is still considered to be residing in Australia. In your case, one of your children has remained living in your family home in Australia and your spouse and other child are living with you in country X for a period of approximately 12 months. They will return to the family home in Australia for the remainder of your time in country X and visit you for holidays prior to your return to Australia. It is clear that you have strong family ties to Australia as opposed to country X and that immediate members of your family will only stay with you in country X for approximately half of your expected time in that country. | Detailed Reasoning - Business or economic: As mentioned above, you have taken up an employment contract in country X for an expected period of a couple of years; however, you have an employment position with your Australian employer being held open for you through a leave without pay arrangement. The leave without pay arrangement is an indication of your continuing association with Australia. | Detailed Reasoning - Assets: Your assets in Australia comprise of your family home, a vehicle, household effects, shares and bank accounts. Your assets in country X consist of a bank account. It is clear that you have stronger financial ties to Australia than country X. | Detailed Reasoning - Maintenance of a place of abode: Whether a place of residence in Australia is rented out to tenants or remains available for the owner and/or family members to live in during any absence from Australia is a significant factor in deciding the residency of an individual. In your case, you are maintaining your fully furnished family home in Australia during your time in country X and one of your children is residing in the dwelling. Your spouse and other child will return to live in the dwelling while you are still working in country X. You are currently remitting funds to Australia each month to meet housing related commitments such as mortgage payments, utilities, council rates, insurance payments and general housing expenses. Although you are renting a dwelling in country X for the duration of your employment contract, you still have a place of residence in Australia that contains your household effects and is occupied by a member of your family. The rest of your family will return to live in the dwelling after approximately a 12 month absence and you will return to live in the dwelling when your employment contract finishes. It is clear that your family home is in Australia which is a strong indicator of your continuing association with Australia during your absence. | Summary: In your case, although you will be physically absent from Australia for an expected period of a couple of years, there are various factors that indicate that you have not ceased to be a resident of Australia. These are primarily: · you have a stated intention of returning to Australia after working in country X for a couple of years; · you are still maintaining your fully furnished Australian residence and one of your children remains living in the dwelling; · your spouse and other child will only live with you for part of the time you are in country X and will then return to the family home in Australia; · you have significant assets and financial arrangements in Australia as opposed to country X; and · you have a leave without pay arrangement in place with your Australian employer. You established a home in a place in Australia and you will retain a continuity of association with that place while you are overseas together with an intention to return to that place. Therefore, you are residing in Australia according to the ordinary meaning of the word and will be a resident under the 'resides' test of residency for the income years ending 30 June 2013, 30 June 2014 and 30 June 2015. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of any of the other tests of residency.