Private ruling: Residency
Published: January 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 taxation purposes for the period you are in Country Y? | Yes.

Relevant facts and circumstances: You were born in Country Y. You are a citizen of Australia. You left for Country Y for work purposes. You lived with your parents prior to going to Country Y. You initially had a visitor's visa to enter Country Y. You have been granted a X year temporary resident permit for Country Y which does not allow you to stay permanently and is only valid while you are employed in Country Y. You intend on returning to Australia for a couple of weeks. You are renting an apartment in Country Y. You have no assets in Country Y. You have a car in Australia. You are employed in Country Y and this employment is for a minimum of several years. You have no spouse or children. You have no social or sporting connections with either Australia or Country Y. You intend on returning to Australia to live in the future. You stated on your outgoing immigration pass that you were leaving Australia for work purposes. You have not removed your name from Medicare yet. You have had your name removed from the electoral roll. You have never been a Commonwealth Government employee. You are over the age of 16.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(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 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 (IT 2650) . 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | 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 IT 2650 and Taxation Ruling TR 98/ 17 Income tax: residency status of individuals entering 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 have gone to Country Y for work purposes. Your contract of employment is for a minimum of several years. You are only able to stay in Country Y for X years on your current resident's permit. This permit requires you to be employed in Country Y. You intend on returning to Australia for a couple of weeks. In recent court cases taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia. In Iyengar v FC of T ( Iyengar's case ), it was indicated that there is a requirement that you at least be physically present in Australia for part of an income year. Further in this case it was considered that the taxpayer remained a resident of Australia for income tax purposes even though during the period he was working overseas (2 years and 7 months) he had only returned to Australia for a two week period and for a 10 day period. We consider that the above facts indicate that you will maintain continuity with Australia for the financial years included in this ruling. | 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 a citizen of Australia. | Detailed Reasoning - (iii) History of residence: Prior to leaving for Country Y you lived in Australia. You lived with your parents prior to going to Country Y. | 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 have gone to Country Y on a visitor's visa for work purposes. You have been granted a X year residents visa which is only valid while you are employed in Country Y. You are renting an apartment in Country Y. You have no sporting or social connections in either Australia or Country Y. You intend on returning to Australia in the future. Based on the above, we do not consider anything about your habits and mode of life during the financial years included in this ruling will be inconsistent with you being a resident of Australia for taxation purposes. | 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 a 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 intend on returning to Australia for a couple of weeks. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You have gone to Country Y for work purposes. You will return to Australia for a couple of weeks visit. | 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: None of your family members have accompanied you to Country Y. You do not have a spouse or children. Your family ties to Australia are strong as your parents remain living in Australia. | Detailed Reasoning - Business or economic ties: You have work in Country Y for at least the next several years. | Detailed Reasoning - Assets: You have a car in Australia and no assets in Country Y. | 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 have a dwelling in Australia as you were living with your parents prior to going to Country Y. | Detailed Reasoning - Summary of Resides Test: As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically: · you have a temporary residents permit which only allows you to stay in Country Y for X years and while you are employed in Country Y · you are a citizen of Australia · you are not a permanent resident of any other country · you intend on returning to Australia to live in the future. Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile of origin is generally their country of birth. However, a new domicile (domicile of choice) may be adopted when a person takes citizenship or applies for permanent residency of country. In your case, your domicile of origin was Country Y, however, this domicile was relinquished when you took out Australian citizenship. Accordingly, your domicile of choice is Australia. You have not indicated that you have changed or are going to change this domicile by adopting citizenship or permanent residency of another country. | 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. The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia for the following reasons: · you have a temporary resident permit for Country Y which only allows you to be in Country Y for X years · you rent an apartment in Country Y · you intend on returning to Australia to live Your accommodation in Country Y is temporary in nature as your permit only allows you to be in Country Y while you are employed and therefore your accommodation is contingent on your employment status. You are a resident under this test. As you are a resident under the resides and domicile tests it is not necessary to consider the 183 day and super tests. | Detailed Reasoning - Residency status: You are a resident of Australia for taxation purposes for the period you are in Country Y.