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

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

Relevant facts and circumstances: Your country of origin is Australia and you are an Australian citizen. You departed Australia and went to Country X on a temporary visa to live and work. During your time in Country X you met your partner and you both decided that you would move and live in Country Y. You had both considered living in either Australia or other overseas countries but it would depend on where you could find work. While living in the Country X you got a job with an international company working offshore in worldwide waters, including Australian waters at times. You work offshore on a rotation basis. Offshore locations vary and you are sent to many locations around the world. You moved to Country Y after some months living in Country X with your partner and have been living there on a non-visa scheme which means Country Y government considers you a tourist. This allows you to live in Country Y for 90 days out of the last 180. Due to your work you easily meet this requirement and you have not needed to apply for a visa. You intend to live in Country Y permanently and plan to marry your partner and continue in your job which is a permanent contract. You are currently renting a house in Country Y with your partner. You have personal household effects which were transferred to Country Y from Australia. You have a Country X bank account. You do not have any assets in Australia other than a bank account. You plan to return to Australia for a short time to visit family and friends. You have spent sometime working in Australian waters. You have never been a Commonwealth Government of Australia employee for superannuation purposes. You have advised the Australian electoral office to have your name removed from the electoral roll. You advised your Australian bank that you are overseas. You advised Medicare to have your name removed from their records. You pay monthly tax on your foreign income and your employer organises the tax for the particular international country you may be working in.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Detailed Reasoning - Residency: 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 . 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | 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 Taxation Ruling TR 98/17 residency status of individuals who enter Australia , and Taxation Ruling IT 2650 residency status of individuals who temporarily live outside 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 - (i) 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 Country X on a visa. You will spend a short time in Australia to visit family and friends. You sometimes work in Australian waters with the international company you work for. | Detailed Reasoning - (ii) 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 are an Australian Citizen. | Detailed Reasoning - (iii) History of residence: Your country of origin is Australia and you are an Australian Citizen. You moved to Country X and lived there for a period of some months where you met your partner and you are now living in Country Y and have been for the past couple of months. | Detailed Reasoning - (iv) 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 met your partner while living in Country X and you both moved to Country Y some months later. Your job means you work offshore on a rotation basis. Offshore locations vary and you are sent to many locations around the world. The nature of your job allows you to meet the requirement of Country Y's 'non-visa scheme' which allows you to live there for 90 days out of the last 180. | Detailed Reasoning - (v) 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 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 a period of two years and seven months to be residing in Australia. You left Australia to move overseas. You will be returning to Australia for a short time to visit family and friends. You have spent time working in Australian waters in the recent financial year. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You will return to Australia for a short visit to see family and friends. You are now living in Country Y/working in worldwide waters. | Detailed Reasoning - (vii) 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: Your parents live in Australia. You now live in Country Y with your partner. | Detailed Reasoning - Business or economic: Assets in Australia · You do not have any assets in Australia other than a bank account. Assets overseas · You have a Country X bank account · You have personal effects in your rental property in Country Y You work for an overseas company in worldwide waters. | Detailed Reasoning - (viii) 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 do not own a home in Australia, and you lived with your parents or were renting prior to departing Australia. You advised that you are renting a place in Country Y with your partner and you have relocated all of your personal effects to Country Y. | Detailed Reasoning - Summary - resides test: Based on a consideration of all of the factors outlined above you were not residing in Australia according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode tests; the 183 day test, and superannuation fund test. | Detailed Reasoning - Domicile and permanent place of abode: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. IT 2650 states that: Persons leaving Australia temporarily would generally be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. Application to the your circumstances Your country of origin is Australia and you are an Australian citizen. You have maintained your Australian domicile as you have not become a permanent resident of any other country. As you have an Australian domicile you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - Permanent place of abode: 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. 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; iii. 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; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. 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. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Consideration of these factors: · Your initial intention was to travel overseas on a temporary visa. · You lived in Country X for some months before moving to Country Y with your partner. · You rent a place in Country Y with your partner where you stay when you return from your offshore work duties in seismic surveying in worldwide waters. · You have only been living in Country Y recently. · You are considered a 'tourist' by Country Y government. · You are only entitled to live in Country Y for 90 days out of the last 180 days. · You are planning on living in Country Y permanently but have not applied for permanent residency. The Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. Although you rent a property with your partner in Country Y, your official status is similar to that of a tourist which means you can be asked to leave/refused re-entry at anytime by Country Y Government. Thus you are not able to establish a permanent place of abode in Country Y because of your temporary nature in Country Y. | Detailed Reasoning - Conclusion - your residency status: Based on the facts, we have determined that you are a resident of Australia for tax purposes.