Private ruling: Residency
Published: October 2013
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? | Yes.

Relevant facts and circumstances: You were born in the Country Y. You are a citizen of Australia. You have gone to Country Z for work purposes. You have an employer sponsored visa for Country Z. You will apply for a resident visa for Country Z. A resident visa is sponsored by your employer and is for one year or three years. Your family will accompany you to Country Z. You do not know when you will return to Australia. You have a two year work contract in Country Z which can be extended. You will receive an accommodation allowance from your employer. You will rent out your family home in Australia. Your employer will pay for your belongings to be transported to Country Z and for them to be returned to Australia at the end of your contract. You have no assets in Country Z. You will return later in the year to pack up your home and collect your family to return to Country Z. You may sell your home in Australia in the future. You have no intentions on returning to Australia for any period during your work contract in Country Z. You will be removing your name from the electoral roll. You will notify your bank you are moving to Country Z. You are removing your name from Medicare and your medical insurance provider and suspending your policy. 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: 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 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 Z for work purposes. You will return to Australia collect your family and belongings and then go back to Country Z. 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 and Commissioner of Taxation [2011] AATA 856 ( 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, it was considered that the taxpayer remained a resident of Australia for income tax purposes even though during the period he was working overseas (two years and seven months), he had only returned to Australia for a two week period and for a ten day period. | 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 and movements: Prior to going to Country Z you lived and worked in Australia with your family. | 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. Prior to going to Country Z you lived and worked in Australia with your family. You are going to Country Z for work purposes and you have a sponsored employment visa which allows you to be present in Country Z only for the duration of your employment. You intend on applying for a resident visa which allows you to stay in Country Z for one or three years. A resident visa also needs to be sponsored by your employer. You will live in employer sponsored accommodation and will be joined by your family. | 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. When considering the issue of return visits to Australia by a taxpayer who was living and working overseas, the Tribunal in Iyengar's case also noted that the brevity of a visit to a particular country compared to length of time spent abroad does not of itself exclude an individual from being a resident in the country visited. Further, the taxpayer in Iyengar 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 and was also considered to be a resident of Australia for income tax purposes. You will return to Australia later this year to collect your family and return to Country Z. You do not intend on returning to Australia for any period during your work contract in Country Z. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: The purpose of your absence from Australia is to work in Country Z. You do not intend on returning to Australia for the duration of your work contract in Country Z. | 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: Your family has accompanied you to Country Z. The Macquarie Dictionary defines 'family' as: · parents and their children, whether dwelling together or not. · one's children collectively. · any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins. | Detailed Reasoning - Business or economic ties: You have work in Country Z for two years. | Detailed Reasoning - Assets: You have a home in Australia which you will rent out while you are in Country Z. You have household effects in Country Z. Your case is similar to the taxpayer in Iyengar's case where the taxpayer was found to be a resident of Australia for tax purposes. In that case the taxpayer did not purchase substantial property whilst overseas, but retained assets in Australia. | 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 will rent out your family home while you are in Country Z. | 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 have not ceased to be a resident of Australia. Specifically; · You are on an employer sponsored visa in Country Z. · You intend on applying for a resident visa which will only allow you to stay for one year or three years. · You have a home to return to in Australia. · Your employer sponsors your accommodation. 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. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode 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'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. Your domicile of origin is Country Y and your domicile of choice is Australia. You have not indicated that you have changed or are going to change your domicile. Your domicile is therefore Australia. | 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 maintain a home in Australia. · You have a employer sponsored visa and you will apply for a resident visa for Country Z which only allows you to be present in Country Z for one year or three years. · You live in employer sponsored accommodation in Country Z. You are a resident under this test. | Detailed Reasoning - The 183-day test: When a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You are not a resident under this test as you do not intend being in Australia for 183 days or more in a financial year. | Detailed Reasoning - The superannuation test: An individual is still considered to be 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. Only Commonwealth Government employees are eligible to contribute to the CSS and PSS. As you and your spouse were not a Commonwealth Government of Australia employee and you are over the age of 16 you will not be treated as a resident under this test. | Detailed Reasoning - Residency status: You are a resident of Australia for taxation purposes for the period you are in Country Z.