Private ruling: Residency
Published: February 2014
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Question and answer: | Are you 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 to live and work in a foreign country from a date onwards. You have resided in the foreign country since then. You currently have a fixed term employment contract in the foreign country. Once this contract expires you have the option of renewing it. You have supplied a copy of your current employment contract. No immediate family members have accompanied you to the foreign country. You have resided in the foreign country on temporary visas since a date. Information on the foreign country's Government's website describes the visa as a working visa related to temporary stays. You have supplied copies of your prior and current visas. You have a partner you met in the foreign country who resides in the foreign country and intends to stay in the foreign country indefinitely; for at least another X years. Your own intention is to live in the foreign country permanently and once married you and your spouse to be plan to buy a property in the foreign country and work to set yourselves up to retire there. When completing the Australian Immigration Outgoing passenger card, you state as the reason for going overseas was for work. However, as you came to enjoy living and working in the foreign country and have established a long term relationship, you now plan to marry and start a family there. You do not hold a return airline ticket. You will only return to Australia for certain occasions. You will not been physically present in Australia for more than 183 days in any of the income years that apply to this ruling application. Since leaving Australia you have returned to Australia on several occasions. Your accommodation is supplied by your employer in a town near where you work. You have lived at two residences since your arrival in the foreign country. You lived an apartment for a period. Your current residence is a house. You have utilised twelve month rental leases for your foreign residences. You have supplied a copy of your current rental agreement. You also rent a property in in another place in the foreign country where you will spend most of your time off. You do not hold a return airline ticket. Your assets in the foreign country are: · some furniture and some kitchen items which you had to buy for a property you rent · the house supplied by your employer came partly furnished so you had to buy furniture, electrical goods and kitchen items · sporting equipment for several sports · an bank account which you use for your day to day banking requirements You have a driver's licence in the foreign country. You have established various club memberships in the foreign country. Copies of membership cards have been supplied. You have assets in Australia: · you own one property in Australia which you lived in prior to your departure for the foreign country. You considered selling it but, due to an unfavourable market, decided to keep it as an investment property. It is rented on a long term contract via a managing agent to an independent third party · a car which you are trying to sell · a motorbike which you are trying to sell · a bank account which you keep mainly to service your investment property. You receive income from Australia from your investment property. This property is your only investment in Australia. You have you advised the bank that you are a foreign resident so that non-resident withholding tax can be deducted. Your Australian household effects were sold or given to family, friends or charity. You do not have a job being held for you in Australia. Your social connections in Australia are family and friends. You have no sporting connections in Australia having cancelled your sporting memberships before your departure for the foreign country. You have you advised the Australian Electoral Office to have your name removed from the electoral roll. You have you advised Medicare to have your name removed from their records. You have had your private health insurance suspended. You have not been a Commonwealth Government of Australia employee for superannuation purposes. You have made and will make no contributions to any Australian superannuation fund during any of the tax years that apply to this ruling application. You are over 16 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(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 · the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides (ordinary concepts) 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'. 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: · 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 to different countries · 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. | Detailed Reasoning - Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this the AAT has stated that: 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. You departed Australia to live and work in the foreign country from a date onwards. You have resided in the foreign country since then. | Detailed Reasoning - History of residence and movements: You lived in Australia, prior to moving to the foreign country since a date. | Detailed Reasoning - Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. You were born in Australia and you are an Australian citizen. | Detailed Reasoning - Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. You have lived and worked in the foreign country since a date. You have an employment contract there with the option of renewing it. You are residing in the foreign country on temporary visas. You live in rented accommodation in the foreign country supplied by your employer. You also have a rental property where you live during your time off. You have established social and sporting connections in the foreign country. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during period of two years and seven months to be residing in Australia. Since leaving Australia, you have returned to Australia on several occasions: | Detailed Reasoning - Purpose of visits to or absences from Australia: You lived and worked in the foreign country since a date. Since then, you have visited Australia for certain occasions. | Detailed Reasoning - Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: You have family in Australia. | Detailed Reasoning - Business: You have an investment property in Australia You are employed in the foreign country on a fixed term employment contract. When this contract expires you have the option of renewing it. You do not have a job being held for you in Australia. | Detailed Reasoning - Assets: In Australia: · an investment property · a car · a motor cycle · a bank account. In the foreign country: · household furniture and goods · equipment for several sports · a bank account | Detailed Reasoning - Maintenance of Place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You own one property in Australia which you lived in prior to your departure for the foreign country. It is rented on a long term contract via a managing agent to an independent third party so you are not maintaining a place of abode in Australia. | Summary: As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically: · you are an Australian citizen · your visa is a short term visa that is sponspored by your employer. Your visa sponsorship is dependent on your job, so if you lose your job, you would be required to leave the country. Further your visa is temporary and its renewal is not automatic. Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period. 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 and permanent place of abode 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 prove an intention to make his or her home indefinitely in that country by applying for permanent residency or citizenship in the foreign country. In your case, as you are still an Australian citizen while living in the foreign country, your domicile is Australia and remains unchanged. 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. In your case, your continuing presence in the foreign country is dependent on your employer sponsored visa. Should your employment cease for any reason, you will lose this and be required to leave the country. Further, should your visa not be renewed at the end of its term, you would also be required to leave the country. Although you have alternative accommodation to your employer sponsored accommodation (your rental property where you spend your time off), it is considered that your rental property is not a permanent place of abode. This property is not a permanent place of abode as your presence in the foreign country (given the duration of your visas, and the fact that their sponsorship is dependent on your job continuing) is temporary in nature so any such property cannot be a permanent place of abode outside Australia. The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia. As you are a resident of Australia under both the resides and domicile tests, it is not necessary to consider the 183 day and superannuation tests. | Detailed Reasoning - Your residency status: As you have passed two of the four tests of residency, you will be a resident of Australia for taxation purposes for the period you are in the foreign country.