Private ruling: Residency
Published: April 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you a resident of Australia for tax purposes from the time your spouse and children relocate to Australia? | Yes.

Relevant facts and circumstances: You are a citizen of Australia. You were born in country Y but no longer hold country Y citizenship. You and your spouse permanently relocated to country X for employment reasons. You have been employed with a foreign employer since your relocation and all your work starts and finishes in country X. Your employment takes you to destinations around the world but not to Australia. You plan to continue working in country X until your retirement age. You and your spouse have been granted permanent residency of country X. You and your spouse have children who have been schooled in country X; however, you have decided to continue their schooling in Australia. Your spouse has returned to Australia with your children and on completion of their schooling your spouse will return to live with you in country X. Your spouse and children will only be in Australia during the school term with holidays being spent in country X and other overseas destinations. They will visit country X during some school holidays and at other times during the year. You estimate that they will be out of Australia for a few months in each calendar year. You plan to spend ten days or less in Australia each month subject to your work roster, excluding leave. You will also visit Australia on annual leave and you estimate that you will spend over a hundred days in Australia each calendar year. You have purchased a home in Australia for your spouse and children to live in. The property is mortgaged to a bank and you will meet the mortgage payments from your salary. You will be responsible for your family's living expenses while they are in Australia. Your spouse is not employed. Your assets in Australia include your house, a motor vehicle, household effects/furniture and bank accounts. You do not receive any income from Australian sources. You receive a monthly housing allowance from your employer. During your time in country X, you have lived in numerous suburbs, both renting and purchasing apartments, depending on your financial situation. You currently live in country X. Your living accommodation is mortgaged and you meet the payments from your housing allowance. Your other assets in country X include a motor vehicle, superannuation fund and bank account. Your parents and those of your spouse live in Australia. You are a member of two clubs in country X. You have no club memberships in Australia. You are not on the Australian electoral roll. You and your family are on the records of Medicare. Your family has private health insurance in Australia. You do not have private health insurance in Australia as you have worldwide cover through your employer. Neither you nor your spouse has ever been employed by the Australian Commonwealth government. 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.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(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 it's 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 court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that 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, it was stated 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: (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 with Australia compared to the foreign country concerned; and (viii) 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 - (i) Physical presence in Australia: In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , it was stated that physical absence from Australia does not preclude an individual from being a resident of Australia. Instead, it must be considered whether the individual has retained a 'continuity of association' with Australia together with an intention to return to Australia and an attitude that Australia remains 'home'. In your case, you have lived and worked in country X for some years and will continue to do so. However, you will now spend more time in Australia following the relocation of your family here. You will visit Australia on work breaks and annual leave and estimate that you will spend 120 to 140 days here each year. Consequently, it is considered that the amount of time you intend to spend in Australia each year is a strong indication of your continuing association with Australia. | Detailed Reasoning - (ii) Nationality: You were born in country Y and are a citizen of Australia. You no longer hold country Y citizenship. | Detailed Reasoning - (iii) History of residence and movements: You were born in country Y. You left Australia to work in country X for an indefinite period of time. | Detailed Reasoning - (iv) Habits and 'mode of life': You and your spouse have been living in country X for some years and you are a permanent resident of country X. You have been employed with a foreign employer since your relocation and all your work starts and finishes in country X. Your employment takes you to destinations around the world but not to Australia. During your time in country X, you have lived in rented and purchased apartments. You currently live in country X. You are a member of clubs in country X and have no club memberships in Australia. You and your spouse have children who have been schooled in country X; however, you have decided to continue their schooling in Australia. Your spouse has returned to Australia with the children and on completion of their schooling your spouse will return to live with you in country X. Your family will only be in Australia during the school term with holidays being spent in country X and other overseas destinations. You and your family are on the records of Medicare. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that the mere fact that visits to a country are of short duration does not of itself exclude residence in that country. The taxpayer in Case 5/2013 [2013] AATA 394; 2013 ATC 1-054 ( Case 5/2013 ) was considered a resident of Australia despite only being present in Australia for five of the 52 weeks under consideration, as the Tribunal considered that his visits indicated that he retained a 'continuity of association' with Australia. Similarly, the taxpayer in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 ( Iyengar's case ), was found to be a resident even though he had only been present in Australia for two separate periods totalling two weeks and ten days during a period of two years and seven months. In your case, you plan to spend ten days or less in Australia each month subject to your work roster, excluding leave. You will also visit Australia on annual leave and you estimate that you will spend over a hundred days in Australia each calendar year. Consequently, it is evident that you intend to make frequent visits to Australia and that you will spend at least four months of each year in Australia. This is a strong indication of your continuing association with Australia. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: The purpose of your absence from Australia is to work in country X and the purpose of your visits to Australia is/will be to visit your family. | Detailed Reasoning - Family: Case law has shown that an individual is more likely to be considered to be residing in Australia where the spouse and any dependent children of the individual to reside in Australia during his or her absence overseas. See Iyengar's case and Case 5/2013 for examples. In your case, your spouse and children were living with you in country X; however, they have now relocated to Australia so the children can continue their education here. This is a strong indication of your continuing association with Australia. We also note that you have purchased a house in the same state in which the parents of you and your spouse live. | Detailed Reasoning - Business or economic: You are employed by a foreign company in country X. You own somewhere to live which is mortgaged and you meet the payments from the housing allowance you receive from your employer. You remit funds from your salary to Australia to meet the living expenses of your family and the mortgage payments on the house you own. This aspect indicates a continuing association with Australia. | Detailed Reasoning - Assets: Your assets in Australia comprise of the house you have purchased, a motor vehicle, household effects/furniture and bank accounts. Your assets in country X include where you live in country X, a motor vehicle, superannuation fund and bank account. | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: Case law has shown that an individual is more likely to be considered to be residing in Australia where they are maintaining a place of abode here; that is, the individual owns a dwelling that is available for the individual and/or family members to live in. See Iyengar's case and Case 5/2013 for examples. In your case, your spouse and children are living in the home you purchased in Australia and it will be available for you to stay in on your return visits. Accordingly, you are maintaining a place of abode in Australia which is a strong indication of your continuing association with Australia. | Summary: In your case, although you are a permanent resident of country X and will continue to be physically absent from Australia for the majority of each year, there are various factors that indicate that you are a resident of Australia. These are primarily: • you are an Australian citizen; • your spouse and children have relocated to Australia and are living in a dwelling you own; • you are maintaining a place of abode in Australia; • you intend to make frequent return visits to Australia and spend more than 100 days each year in Australia with your family; and • you are remitting funds to Australia to meet the living expenses of your family and the mortgage payments on the house you purchased. Your circumstances indicate that you have a 'continuing association' with Australia and an attitude that Australia remains 'home'. Therefore, you are a resident of Australia under the 'resides' test of residency from the time your spouse and children relocated to Australia. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency. | Detailed Reasoning - Mayhew's case: In your ruling application, you mentioned the case of Mayhew v Commissioner of Taxation [2013] AATA 130 ( Mayhew's case ) where the taxpayer was found to be a non-resident of Australia. In this case, the taxpayer, who was not a citizen of Australia, relocated to a foreign country with his spouse for an indefinite period of time, let one of his adult children live in his former residence in Australia and stated that he had no intention of living in the dwelling again. However, in your case, you are a citizen of Australia, your spouse and children have relocated to Australia, they are living in the house you own and you intend to spend at least one third of each year in Australia with your family. Consequently, we consider that your circumstances are significantly different from those in Mayhew's case . | Detailed Reasoning - Your residency status: You are a resident of Australia for tax purposes for the years covered by this ruling.