Private ruling: residency
Published: December 2013
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Questions and answers: | 1. Are you a resident of Australia for taxation purposes? | Yes. | 2. Is your income assessable in Australia? | Yes.

Relevant facts and circumstances: You were born in Country Y and are a citizen of country y. You came to Australia on a visa. Prior to coming to Australia, you lived in County Y and Country Z. You intend on being in Australia for the duration of your visa except for a couple of short visits overseas. You work for an overseas country employer. You carry out this work from your apartment in Australia. You have a joint bank account in Australia with your spouse. You have a joint bank account in Country Y and registered and non-registered investments in Country Y. You play sport for a team in Australia. You played sport in Country Y until you left. You have left Australia for a short period since leaving for work purposes. You and your spouse live in rented accommodation in Australia. You do not have a permanent home in country Y. Neither you nor your spouse are currently or have ever been Commonwealth government employees.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | 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. 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. Generally the Commissioner regards six months or 183 days as a considerable time when deciding an individual's behaviour is consistent with residing here. The Commissioner is also of the view that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. 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. (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 came to Australia on a visa. You work from your apartment in Australia. You have left Australia for a short period for work purposes since arriving in Australia in a later income year. (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 Country Y and you were born in Country Y. (iii) History of residence You lived and worked in Country Y and Country Z prior to coming to Australia. (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 You live with your spouse in a rented apartment in Australia. You work from the apartment for an overseas company. You have an Australian joint bank account with your spouse. (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 have been living and working in Australia since first arriving in Australia. You have left Australia for two short periods since first arriving (both in later income years than the period of the ruling). (vi) Purpose of visits to or absences from Australia As discussed above you have left Australia for work purposes, and a planned short visit overseas since arriving. You did not leave Australia during the income year that is the subject of the ruling. (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. Family Your spouse lives with you in Australia. Business or economic ties You work for an overseas company. You carry this work out from your apartment in Australia. Assets You have a joint bank account and some investments in Country Y. You have a bank account and personal items in Australia (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 live in rented accommodation in Australia. | Summary: 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 are a resident of Australia. Specifically; · You work from your apartment in Australia · You expect to be in Australia for more than a couple of years · You have been living and working in Australia with your spouse. Based on a consideration of all of the factors outlined above you are a resident of Australia according to ordinary concepts as you maintain a continuity of association with Australia for the relevant period. Your behaviour along with your continuity, routine and habit is consistent with someone who is residing in Australia. | Detailed Reasoning - Assessability of Income: 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 ordinary income gained from all sources, whether in or out of Australia. You are assessable on your ordinary income regardless of source as you are a resident of Australia for tax purposes. This includes the income you derive from your employment. This income must be declared in your Australian tax return.