Private ruling: Residency
Date of advice: 25 January 2019
Published: May 2019
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you a non-resident of Australia for tax purposes while you are working in the Country A? | A1: Yes | Q2: Are you a resident of Australia for tax purposes from the date you permanently return to Australia? | A2: Yes

Relevant facts and circumstances: You were born in Country B and are a citizen of both Country B and Country C. You departed Country B in 20XX to take up a position in Country A. You were employed by a University in Country A. You obtained funding under a research program. This program included a period of research in Country A and a period of research in Country B. You lived in a rental house prior to your departure for Country A and stayed with family and friends after the end of your lease. You do not own any property in Country B. Your fiancé and sibling shared use of your car while you were out of Country B and you placed your few household and personal effects into storage. You notified the electoral office you were temporarily overseas before your departure. You did not ask to be removed from the electoral role. In the year beginning 1 July 20XX you were offered a 2 year employment contract with an option to extend to 3 years, commencing the same year. At this point you intended to live and work in Country A indefinitely. Your Country A bank account is your only asset in Country A. Whilst in Country A, you rented a shared apartment. Your employer did not provide accommodation. You remained in Country A on a visa. This visa did not allow you permanent residency. However, other visas were available. Your fiancé did not accompany you to Country A. Your immediate family are based in Australia and you have some friends in Country B. Most of your close friends are based in Country A. You returned to Country B for both private and work reasons throughout the relevant years. These trips were mostly funded by your employer. During these trips you stayed with your fiancé, friends or family. You returned to Country B in the 2017-18 year after your fiancé suffered a permanent medical injury. In doing so, you ended your employment contract. When you returned to Country B, you intended to find work in Country A that would allow your fiancé to return with you. In early 20YY you were offered a position in Country B. You deferred the start date. You returned to Country A on in late 20YY to attend a job interview, however were unsuccessful in obtaining this position. In late 20YY you accepted this position as you were unable to secure work in Country A and decided to remain in Country B and care for your fiancé. You lodged tax returns during your time in Country A. You and your spouse have never been employees of the Commonwealth Government or members of any government superannuation schemes. You did not receive any income from Country B whilst living in Country A except for interest earned on your Country B bank accounts.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 subsection 6-5(1)

Reasons for decision: Summary: Under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997), assessable income of an Australian resident for tax purposes includes ordinary income from all sources, whether inside or outside of Australia. Subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides four tests to determine whether a taxpayer is a resident of Australia for tax purposes. The four tests are: ● The resides test; ● The domicile test; ● The 183-day test; and ● The Commonwealth Superannuation test. If any one of these tests is satisfied, an individual will be considered a resident of Australia for tax purposes. | Detailed Reasoning - The resides test: When determining residency under this test, the word ‘resides’ should be given its widest meaning. Case law has identified a number of factors which assist in determining whether an individual is a resident of Australia for tax purposes: ● 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 of different countries; and ● Maintenance of place of abode. Whether a person ‘resides’ in Australia is a question of fact and degree. There is no single decisive factor; weight is given to each factor based on the circumstances of the case: Federal Commissioner of Taxation v Miller 73 CLR 91 at 101 per Rich J and at 103 and 104 per Dixon J. You were born in Country B and are a citizen of both Country B and Country C. You left for Country A in early 20XX to take up new employment. You did not have a home back in Country B as you previously lived in rental accommodation and stayed with your family and friends in the lead up to your departure. You returned to Country B multiple times during the period of time you were overseas. In the relevant years you were in Australia for approximately X months and X months respectively. These trips were predominately for work with X weeks of personal travel in the 2016-17 year. As part of your employment, you spent X months in Country B and X months in Country A conducting research. During this time your position remained based in Country A and you stayed with family and friends. During other visits you stayed with your family and friends as you did not maintain a home in Australia during your time in Country A. You returned to Country B permanently in the 2017-18 year following your fiancé’s medical injury. Majority of your time was spent in Country A, where you lived in shared apartments as your employer did not provide you accommodation. Whilst in Country A you kept the few household effects and personal items you owned in storage at your fiancé’s company warehouse. Although you originally intended to sell your car, your sibling and fiancé shared use of your car. Your fiancé and family remained in Country B for the duration of your time overseas. Your fiancé did not accompany you in Country A as they were running their own company which was expanding quickly and was also unable to unable to obtain residency under your visa. You have family and social ties both to Country B and Country A. Your parents, fiancé and some family are in Country B, however majority of your friends are based in Country A. From mid-20XX, your intention was to reside in Country A for an indefinite period. Your intention to live and work in Country A indefinitely remained when you returned home to assist your fiancé in late 20YY. It was not until late 20YY when you decided you were no longer staying in Country A indefinitely as you were unable to secure permanent employment. It is also noted you are a tax resident of Country A during the period you were working there. However, a person can be a resident of more than one country under the respective tax laws of those countries. You also informed the electoral commission of your absence. Under this test, you are not a Country B tax resident for the duration of your time in Country A. The facts provided indicate a subjective intention of continuity with Country A during your time overseas. You are considered a resident of Country A for tax purposes from the date of your arrival back in Country B. | Detailed Reasoning - The domicile test: An individual whose domicile is Australia is considered a resident of Australia for tax purposes unless the Commissioner is satisfied the person’s permanent place of abode is outside Australia. Domicile is determined according to the Domicile Act 1982 and common law rule. A person’s domicile is usually their country of birth, unless they obtain a different domicile by choice or by law. In your case, your domicile of origin is Australia. Your domicile remains Australia for your time in Country A, unless you established a permanent place of abode in Country A. Permanent place of abode Whether a person has established a permanent place of abode outside of Australia is a question of fact determined on all circumstances of the case: Applegate v Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (‘ Applegate ’); FCT v Jenkins 82 ATC 4098; (1982) 12 ATR 745. Courts have considered ‘place of abode’ as the physical dwelling where one lives and sleeps at night. Permanent does not have to mean everlasting or forever, but should be distinguished from temporary or transitional. Taxation ruling IT 2650 Income Tax: Residency – Permanent place of abode outside Australia (‘IT 2650’) sets out the following factors considered by the Commissioner in determining whether an individual has set up a permanent place of abode outside Australia: (a) The intended and actual length of the individual’s stay in the overseas country; (b) Whether the individual intended to stay in the overseas country temporarily and move on to another country, or to return to Australia at some definite point of time; (c) Whether the taxpayer established a home in the overseas country; (d) Whether an abode exists in Australia or has been abandoned because of the overseas absence; (e) The duration and continuity of the taxpayers presence in the overseas country; and (f) The durability of association that the person has with Australia. Paragraph 24 of IT 2650 provides no single factor is decisive and weight should be given to each factor varying on the circumstances. However, greater weight should be given to factors (c), (e) and (f): Applegate. In your case: ● The length of your stay overseas was X years and XX months. You intended to see out your X year contract and remain in Country A afterwards. As a general rule of thumb, a period of 2 years or more is considered a substantial period of stay. However, this in itself is not conclusive and must be considered with all factors. ● You have indicated you intended to remain in Country A indefinitely. When you returned to Country B in late 20YY after your fiancé’s medical injury, your intention was still to live in Country A indefinitely. This intention changed when you were unable to secure permanent work and accepted a temporary position in Country B. ● Accommodation in Country A was not provided by your employer. You lived in shared apartments and signed a rental agreement up until mid-20YY. You set up bank accounts in Country A which your salary was deposited into and used for living expenses. ● You did not have an established home in Country B. You lived in rental accommodation and after your lease ended you stayed with friends and family before your departure. You had very few personal effects and household effects in Country B which were held in storage upon your departure. You did not close your Country A bank accounts as you used your Country A bank account for living expenses during work trips to Country A. ● You established significant social connections in Country A. You attended several weddings of friends in Country A and have indicated most of your close friends and family friends are now based in Country A. Your fiancé remained in Country B to run their company. After their medical injury, they were going to move to Country A with you if you were able to get a sustainable job. You have some family and friends in Country B. The facts provided suggest that while you did retain your Country B domicile you set up a permanent place of abode in Country a. Therefore, you are not considered a resident under the domicile test for your time in Country A. | Detailed Reasoning - The 183-day test: Where an individual is present in Australia for 183 days or more during the income year, they are an Australian resident for tax purposes. This is unless the Commissioner is satisfied the individual’s usual place of abode is outside Australia. During the relevant income years you were present in Australia for less than 183 days and the Commissioner is satisfied your usual place of abode is outside Australia. In the 2017-18 income year, you were present in Australia for more than 183 days. As such, for the period you were living in Country A you do not satisfy the 183-day test and are not considered a resident for tax purposes under this test. You are considered a resident under this test upon your return to Country B. | Detailed Reasoning - The Commonwealth superannuation fund test: An individual is considered a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You are not considered a resident under this test. | Detailed Reasoning - Your residency status: You do not satisfy any of the four residency tests outlined in subsection 6(1) of the ITAA 1936 as the Commissioner is satisfied you established a permanent place of abode outside Australia during your time in Country B. You are considered a resident of Australia from your return to Australia in late 20YY under the resides and 183-day test.