Private ruling: Residency
Published: October 2014
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 20XX

Ruling: Questions and answers | 1. Were you a resident of Australia for tax purposes while you were working in country X? | No. | 2. Will you be a resident of Australia for tax purposes while you are working in country Y? | No.

Relevant facts and circumstances: You are an Australian citizen. You were born in the country Z and were later granted permanent residency of Australia. You hold a country Z passport. Your spouse was born in country Y and holds a country Y passport. You were living and working in Australia until you accepted a position with your existing employer in country X. Your spouse and child (your family) accompanied you to country X. Your employment contract stated that the assignment duration was for approximately 12 months or until completion of the assignment, whichever was earlier. Your employment contract ultimately lasted for over four years. Your country X visa was a temporary resident visa stating intercompany transferee. The original visa was issued for three years and then extended for another three years. You and your family lived in rental accommodation in country X with the lease being in the company name with reference to you as the tenant. All the utilities were in your name and paid by you. Your employment contract stated that you would be paid a monthly housing allowance to assist with apartment rental, furniture rental and utilities. Your accommodation was unfurnished and you purchased furnishings and white goods which were later sold when you departed the country. You opened a bank account in country X which was closed when you eventually departed the country. You completed tax returns in country X and were treated as a local resident. During your time in country X, you attended Australia on four business trips in approximately three years, all of which were paid for by the company and related to the country X project and handover to other project locations outside of country X. Your family did not return to Australia during the period you were working in country X. You accepted another contract with the same employer in country Y. You and your family left country X and returned to Australia for a break of approximately two weeks before flying to country Y in order for you to commence your new contract. The initial period of the contract is for 12 months; however, the exact period is uncertain and is expected to be greater than 12 months. You have a work permit for one year which will be renewed as required. You are living in rental accommodation in country Y and the lease and all utilities are in your name and paid by you. Your employment contract states that you will be paid a monthly allowance to cover the cost of furnished accommodation and utilities. At this point, you have not purchased any assets in country Y; however, you have opened a bank account. It is likely that you and your family will visit Australia for recreational purposes during the next 12 months when leave becomes available. On expiry of the country Y contract, you intend to seek further employment contracts outside of Australia. You have no position being held for you in Australia and no guarantee of any employment should you return to Australia. On your outgoing Australian immigration cards you have always indicated that your travel is for employment. Prior to your departure for country X, you lived in a property you own which has been rented out through an agent. Your household possessions were placed in storage. Your Australian assets include house properties which are being rented out, furniture in storage, bank accounts and superannuation. The properties are mortgaged and you have been remitting part of your salary to assist with mortgage repayments on some of the properties. The only family members you have living in Australia are your parents and your spouse has no other family in Australia. You have no sporting or social connections with Australia. Neither you nor your spouse has ever been employed by the Australian Commonwealth government. You have not had your name removed from the Australia electoral roll and were not aware that there was any need to. You have not advised any financial institutions that you are a non-resident as you did not think it was necessary. At the time you relocated to country X, you notified you private health insurer and they suspended your membership. You notified Medicare to remove your name from its records four years after you first left. You did not do so prior to this due to the complexities of your situation.

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' and 'permanent place of abode' 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'. In deciding cases of residency, the courts and tribunals have noted that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. Instead, the test is whether the person has retained a continuity of association with a place in Australia, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation 2002 ATC 2088 ). In your case, there are various factors that indicate that you were not residing in Australia during the period you were in country X. These are: • you spent over four years in country X while you completed your work assignment; • your family accompanied you to country X; • you and your family lived in rental accommodation in country X; • your Australian residence was rented out and unavailable for you to occupy; • you only made return trips to Australia for business purposes during this period; • your family did not return to Australia during this period; and • by the end of your time in country X you had the intention of continuing to live and work outside Australia. Although you had continuing links to Australia through your assets, borrowings, employer and other family members, you were living in country X for a substantial period of time and on balance, it is considered that you were not residing in Australia according to the ordinary meaning of the word. Following your assignment in country X, you returned to Australia for a break of approximately two weeks before leaving Australia to take up a new work assignment in country Y. Once again, there are various factors that indicate that you will not be residing in Australia during the period you are in country Y. These are: • the work assignment is for an initial period of 12 months; however, you expect the actual period to be longer; • your family accompanied you to country Y; • you and your family are living in your own rental accommodation in country Y; • your Australian residence is rented out and unavailable for you to occupy; and • you intend to seek further employment contracts outside of Australia on completion of the country Y assignment. Although the length of your assignment in country Y is unclear, you have not formed an intention of returning to Australia to live in the foreseeable future, and on balance, it is considered that you will not be residing in Australia according to the ordinary meaning of the word during the period you are in country Y. Based on the information you have provided, you were not residing in Australia during the period you were working in country X and will not be residing in Australia during the period you are working in country Y. Therefore, you are not a resident of Australia under this test. | Detailed Reasoning - The domicile and permanent place of abode 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: A person's domicile is generally their country of birth. This is known as a person's domicile of origin. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case, your domicile of origin was country Z and you subsequently acquired a new domicile in Australia when you gained permanent residency here. Although you were living and working in country X for over four years and have now relocated to country Y, you did not take any legal steps to change your domicile to country X and there is currently no evidence to show that you have taken any legal steps to change your domicile to country Y. Therefore, your domicile is still Australia. | 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. 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 necessarily prevent the taxpayer in establishing that they have set up a permanent place of abode elsewhere. The Commissioner's view on what constitutes a permanent place of abode is contained in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650). Clearly, the longer an individual stays in any one particular place, the more permanent in nature is likely to be the stay in that place of abode. An individual's intention regarding the duration of the overseas stay and the length of the actual stay are significant factors in deciding whether they have set up a permanent place of abode. Where a taxpayer leaves Australia for an unspecified or a substantial period and establishes a home in another country, that home may represent a permanent place of abode of the taxpayer outside Australia. However, a taxpayer who leaves Australia with an intention of returning to Australia at the end of a 'transitory' stay overseas would remain a resident of Australia for income tax purposes. It is the Commissioner's view that an overseas stay in excess of two years may indicate that an individual can be considered to have a permanent place of abode overseas, subject to a consideration of all the other relevant circumstances applying to the taxpayer (paragraphs 25 and 27 of IT 2650). In your case, as already mentioned, you were based in country X with your family for over four years and are now based in country Y with your family for at least 12 months and have no fixed intention of returning permanently to Australia in the foreseeable future. You have rented accommodation with your family for this period and your Australian residence has been rented out. It is evident that you spent a substantial period of time living in country X and will continue to live outside Australia for an unspecified period of time into the future. Consequently, the Commissioner is satisfied that you had a permanent place of abode outside of Australia during the period you were in country X and will have a permanent place of abode outside of Australia during the period you are in country Y. Therefore, you are not 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 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. You were not present in Australia for more than 183 days in any of the relevant years and were not a resident of Australia under this test. | Detailed Reasoning - The superannuation test: A person will be considered a resident under this test if they are currently eligible to contribute to certain superannuation funds for Australian Commonwealth government employees. You are not a resident under this test as neither you, nor your spouse, are Australian Commonwealth government employees who are eligible to contribute to the relevant Commonwealth government superannuation schemes. | Detailed Reasoning - Your residency status: As you do not meet any of the above tests of residency for the relevant income years, you are not a resident of Australia for tax purposes for those years.