Private ruling: Residency for tax purposes
Published: June 2012
Ruling period: Year ended 30 June 2011 | Year ending 30 June 2012 | Year ending 30 June 2013
Date scheme commenced: 1 July 2010

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

Relevant facts and circumstances: You are a citizen of Australia. Australia is your country of origin. You have never been a Commonwealth government employee. In the year ended 30 June 2011, you started full-time employment in Country X under an employment contract with a two year term plus options for extension. Since then, your contract has been extended with further options for extension by mutual agreement. The employment contract is governed by the laws of Country X. Whilst in Country X, you stay in company supplied accommodation. This is standard due to the lack of developed facilities and remoteness of the work site. Until recently, your accommodation was based at the work site itself. Your employer has now arranged for you to stay in a unit in the nearest town. You assert that you have no plans to return to Australia although you do expect to visit regularly. In the employment agreement you were given an Australian "point of hire" address, nominated by yourself because of its international airport and proximity to your children. The terms of your employment require an out of country rotation, entitling you to return to your point of hire or any other destination of choice with a credit for equivalent travel costs. Your work rotation is 4 weeks on, 2 weeks off. You have children living in Australia, who reside with your former spouse. You maintain a bank account in Australia into which some of your income to service your maintenance agreement with your former spouse. You also maintain a bank account and investment account in Country X. You also maintain a registered motor vehicle and a lease on a unit in Australia. You assert that this connection with Australia is purely to better facilitate your parenting time with your children. The lease of the unit provides a stable and familiar environment for your children when visiting with you at no greater cost than renting temporary accommodation. Due to this family connection you expect to return to Australia regularly for your "out of country" rotation under your employment agreement.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 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, and · the superannuation test. 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: · whether the person is physically present in that country at some time during the year of income · the history of the person's residence and movements · if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits · if the person is outside the country for part of the relevant income year, the purpose of the absences · the family and business ties which the person has with the particular country, and · whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. In your case, you are working in Country X. When you are working you stay in accommodation supplied by your employer. When you are not working you are required to leave Country X to return to Australia, or another country of your choice. You return to Australia when you are not working and live in a rented unit. Your children remain in Australia and live with your former spouse. Although you have economic ties to Country X by way of your employment and your bank accounts, your ties to Australia are stronger, as you maintain a home in Australia, you return to Australia when you are not working, you have assets in Australia by way of a car and bank accounts, and your children are in Australia. Based on these facts, you are residing in Australia according to the ordinary meaning of the word. Therefore, you meet the 'resides test' and are a resident of Australia for tax purposes. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Australia because you were born in Australia and you are an Australian citizen. | Detailed Reasoning - Permanent place of abode: It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: · the intended and actual length of the taxpayer's stay in the overseas country; · whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; · whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; · whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; · the duration and continuity of the taxpayer's presence in the overseas country; and · the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. In your case the Commissioner is not satisfied that you have a permanent place of abode outside of Australia for the following reasons: · You stay in accommodation supplied by your employer when working in Country X · You are required to leave Country X when you are not working · You maintain a home in Australia · You return to your home in Australia when you are not working Therefore, you are a resident of Australia under this test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. As you are not physically present in Australia for more than 183 days in an income year, this test does not apply to you. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. As you have never been a Commonwealth government employee this test does not apply to you. | Detailed Reasoning - Your residency status: As you meet the resides test and the domicile test, you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.

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