Private ruling: Residency
Published: February 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2009

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

Relevant facts and circumstances: You are an Australia citizen. Your country of origin is foreign country #4. Initially you were employed by a government agency in the foreign country #1 and then in foreign country #2. You then returned to country #1 to work with a private contracting company. You have been employed by your employer, in foreign country #1, for several years, initially as a casual employee and then on a yearly full time contract. You have continued to renew this contract. You have been informed by your employer that you will be offered the renewal as long as they maintain their contact with foreign country #1. Their contract with foreign country #1 is due to be renewed soon. You will continue to renew your contract with them until either the conclusion of their contract in foreign country #1or upon reaching your retirement age. You work in foreign country #1 has meant that you have been in foreign country #1 for most months of each year. The time you spend in Australia is divided between your Australian dwelling and visiting your family. Your spouse also uses it for such visits. The rest of the year the Australian dwelling is left vacant. Your spouse, a citizen of foreign country #5 and an Australian tax resident, moves between the family's home in Australia, and a house in foreign country #3, where you and your spouse purchased a lease several years ago. You state you have maintained Australian bank accounts because neither you nor your spouse is citizen of foreign country #3 and, as such, not allowed to open a bank account and banking services in foreign country #1 are limited. However, as an Australian citizen you are entitled to open an Australian bank account, a move which is practical as the Australian banks have branches in both foreign country #1 and foreign country #3, You utilize Australian accounts with these banks to meet your living expenses. As an Australian citizen you are expected to vote, an obligation you fulfil by being registered as a non-resident with the Australian Electoral Commission. You have registered yourself as a non-resident with the Department of Foreign Affairs. You have indemnity insurance with the Australian insurer, this policy has had you registered as working overseas. As an Australian citizen, you are entitled to Australian health benefits, although you have not made use of it. You have not bought any substantial items for your Australian residence for several years. You gave your Australian car to someone. This was done because the substantial amounts of time you spent in foreign country #1 and foreign country #3 meant that the car was never used. You still keep a wardrobe of clothing at your Australian residence but these are not considered suitable for the conditions of foreign country #1 and foreign country #3. You and your spouse have a self managed superannuation fund (SMSF) and an interest in another superannuation fund, both of which are based in Australia. You are a non-resident director of the SMSF and your spouse is a resident director. You and your spouse have never been Commonwealth Government of Australia employees. You are more than 16 years of age. Foreign Country #1 Your residence in foreign country #1 is on the basis of a work permit with an indefinite time frame. Furthermore, as part of your contract, are provided with an apartment, which you have lived in for several years. This residence is a self-contained apartment within foreign country #1. You do your own grocery shopping, prepares your own meals, do your own laundry. You have not applied for a residency visa or citizenship in foreign country #1. You pay for many of the household amenities, such as internet and satellite TV access and you have installed the apartment's wireless internet system and satellite TV service. You have authority to invite anyone you wish to visit or stay, and your spouse and friends do in fact stay over from time to time. Although the apartment came furnished, you did purchase items for it. You also have a company car. You keep your personal belongings at this address. You have built up a relationship with the community in which you live, having joined a social club, exercise club, and walking group. Foreign Country #3 You have not applied for a residency visa or citizenship in foreign country #3. You can reside in foreign country #3 without applying for a visa, so long as each visit is no more than two months in duration. You and your spouse purchased a lease on a property in foreign country #3. You have renovated this property and purchased furniture for it. You also employ two local people to do housekeeping. After the conclusion of your employment, you are unsure what you will do. You will divide your time between your residence in foreign country #3 and in Australia. You may make one of them your primary residence or habitual place of abode but you have not yet decided. Relevant legislation provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) Income Tax Assessment Act 1936 Subsection 6(1)


Reasons for decision: Summary: An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the 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 . 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 satisfy 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'. Taxation Ruling IT 2650 provides guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay. The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states: The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes. In your case, you have been working in foreign country #1 for several years. You will remain there until as long as your employer remains there. You have stay in a house provided for you by your employer. You retain places to live in foreign country #3 and Australia, where your spouse lives (and intends spending more time in there after upon retirement). You only stay in foreign country #1in order to fulfil your work contract and spend the remainder of your free time in foreign country #3 or Australia with your spouse who is an Australian resident for tax purposes. It cannot be said that you are residing in foreign country #1 under normal concepts as you are only there to work and return to Australia to be with your family. While you also spend time in foreign country #3, sometimes with your spouse, you still reside in Australia under normal concepts. Accordingly you are a resident of Australia under the resides test. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. 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. In your case, as you are still an Australian citizen while working in foreign country #3, and staying in foreign country #3 on occasions. You have not taken any steps to be able to reside in or become a citizen of any other country. Therefore your domicile is Australia. 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include: · 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 your case, for several years, you have worked in foreign country #1. You stay in a dwelling supplied by your employer but make short visits to foreign country #1 or Australia, where you also have houses. Your spouse remains in Australia but intends to spend time in foreign country #3 after retirement. Your intention is to remain working in foreign country #1 for as long as your employer remains there or until you reach retirement age. You have connections to Australia, foreign country #1and foreign country #3. However, on balance and based on the above, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. You only go to foreign country #1 to work, you cannot stay for more than 2 months at your house in foreign country #3 and you maintain a home in Australia which your return to reside with your spouse (an Australian resident). Therefore, you are also a resident under the domicile test. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. Since departing Australia you have returned to Australia on several occasions but not for a total of more than 183 days in any income year. You expect this pattern to continue for the remainder of the 2012 income year and the 2013 income year. Accordingly, you are not present in Australia for more that 183 days in any income year. Therefore, you are not a resident of Australia under the 183-day test. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You have stated that you and your spouse have never worked for the Commonwealth Government of Australia. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test. | Detailed Reasoning - Conclusion: As you are a resident of Australia under both the resides and domicile tests of residency in, you are an Australian resident for taxation purposes.

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