Private ruling: Residency
Published: May 2014
Ruling period: Income year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you a resident of Australia for tax purposes for the year ended 30 June 2013? | A1: Yes

Relevant facts and circumstances: You were born in Australia. You are a citizen of Australia. You moved to Country X many years ago. From the financial year 20xx, you were in Australia to manage Y Company whilst the permanent General Manager was on leave and to supervise and improve a variety of operational problems. During this time you were physically present in Australia for 258 days You have holdings in companies that have factories in Country X and employ a significant number of staff in Country X: You own xx% interest in companies, via two holdings in which you hold shares; yy% personally of the shares in the second Country X trading company; zz% of the shares in the third Country X trading company. The Country X company in which you have xx% interest owns a significant portion of the shares in a trading company in Australia and less than 50% of the shares in another trading company in Australia. You inherited a large percentage of the shares in another trading company. You own in your own name a large percentage of the shares of a small trading company based in X. You are a beneficiary of an Australian discretionary trust which was established over thirty years ago. This discretionary trust has an interest via holding companies in 100% of the shares in trading companies based in X and Y and in xx% of the shares in a trading company based in X and Y and xx% of shares in a trading company based in Z. These trusts only receive dividend income. You are a managing Director of x companies in Country X and Director of the Australian companies. You are also a Director of some non-trading companies in Country X and Australia. All of the Australian companies in which you are a Director have at least one other Director who is a resident of Australia. The Australian companies source materials and products from the Companies of country X. You received directors' fees from the X based company in the 2013 financial year. You receive a distribution income from the Australian unit trust and a distribution of income from the Australian discretionary trust in which you are a beneficiary. Whilst working in Y you lived in a home unit owned by an unrelated party and rented by the Australian company of which you are a Director. In X you lived in a home unit which is owned by an investment trust in you have an interest. This property is left vacant for you to live in when you travel to X. In Country X you live in an apartment which is owned by one of the Australian trading companies in Country X in which you have interest. You have a bank account and a credit card in Australia. You have bank accounts in Country X You have assets in Country X and Australia. Your do not have any have social or sporting connection in Australia. You have familial connection to Australia through your parent and sibling. You have social or familial connection to Country X. Your spouse travels with you to Australia. You and your spouse lodge Australian tax returns each year. Neither you, nor your spouse, have ever been Commonwealth government employees. Your tax agent advised that he has been your tax agent since 200x. For a number of years you have travelled to Australia and stayed mainly in X in the home unit that is left vacant for you to visit. You have travelled to Australia in the particular financial year and were physically present for more than 183 days due to business purpose and medical treatment You will be in Australia for more than 183 days in the recent financial year and intend to apply for a private ruling at that point.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1

Reasons for decision: Detailed Reasoning - Residency: 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). An Australian resident is taxed in Australia on income from all sources; a non-resident is only taxed in Australia on income from Australian sources. The definition provides four tests to ascertain if an individual is a resident of Australia for income tax purposes. These tests are: 1. The resides test (residence according to ordinary concepts) 2. The domicile test 3. The 183 day test 4. 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 the individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for income tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - 1. The resides (ordinary concepts) 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'. Various court and Tribunal decisions have considered the ordinary meaning of the word 'reside' with the recent being Pillay v. Commissioner of Taxation AATA 447; Sneddon v. Commissioner of Taxation [2012] ATC 10-264; [2012] AATA 516 ( Sneddon ), Iyengar v. Commissioner of Taxation [2011] ATC 10-222;[2011] AATA 856 ( Iyengar ). The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year: • 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 with Australia compare to the foreign country concerned; and • Maintenance of a place of abode. These factors are similar to those set out in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia . Although no one single factor is decisive and the weight given to each factor depends on individual circumstances, IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. | Detailed Reasoning - Physical presence in Australia: TR 98/17 considers physical presence or length of time by itself is not determinative of residency. An individual's behaviour as reflected by a degree of continuity, routine or habit that is consistent with residing here is relevant. In the income year ended 30 June 20xx, you were here for 258 days From 200x to 200x you have travelled to Australia and stayed mainly in X in the home unit that is left vacant for you to visit. You have travelled to Australia in the particular financial year and were physically present for more than 183 days due to business purpose and medical treatment. You will be in Australia for more than 183 days in the recent financial year and intend to apply for a private ruling at that point. | Detailed Reasoning - 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 were born in Australia and are a citizen of Australia. | Detailed Reasoning - History of residence and movements: You moved to Country X some years ago. You live in an apartment in Country X which is owned by one of the trading companies in Country X in which you have interest. From 200x to 200x you have travelled to Australia and stayed mainly in X in the home unit that is left vacant for you to visit. You have travelled to Australia in the particular financial year and were physically present for more than 183 days due to business purpose and personal reasons. In the 20xx financial year, you were in Australia to manage Y Company whilst the permanent General Manager was on leave, supervise and improve a variety of operational problems. You plan on entering Australia in the recent financial year and will stay for over 183 days. | Detailed Reasoning - 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. "Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia." (TR 98/17, paragraph 43) You moved to Country X many years ago. In the income year ended 30 June 20xx, you were physically present in Australia for 258 days The main reason for being in Australia during the 20xx financial year was for business purposes due to a series of problems experienced by the Y based company in which you are a Director. During the 20xx financial year, you were acting as General Manager for the Y Company whilst the permanent General Manager was on leave. You have holdings in X major companies in Country X and employ a significant number of staff in Country X: You own xx% interest in companies, via two holdings in which you hold shares; This company. yy% personally of the shares in the second Country X trading company; zz% of the shares in a third Country X trading company. The Country X company in which you have xx% interest owns a significant portion of the shares in a trading company in a particular Australian state and less than 50% of the shares in a another trading company in a particular state. You inherited a large percentage of the shares in another trading company. You own in your own name a large percentage of the shares of a small trading company based in X. You are a beneficiary of an Australian discretionary trust which was established over thirty years ago. This discretionary trust has an interest via holding companies in 100% of the shares in trading companies based in X and Y and in xx% of the shares in a trading company based in X and Y and xx% of shares in a trading company based in Z. These trusts only receive dividend income. You are a managing Director of three Companies of country X and Director of the Australian companies. You are also a Director of some non-trading companies in Country X and Australia. Whilst working in X you lived in a home unit owned by an unrelated party and rented by the Australian company of which you are a director. In X you lived in a home unit which is left vacant for you to live in when you travel there. In Country X you live in an apartment which is owned by one of the trading companies in Country X in which you have interest. You have a bank account and a credit card in Australia. You have bank accounts in Country X. Your spouse lives with you in Country X and travels with you to Australia. You have social or familial connection to Australia through your parent and sibling. You have social connections in Country X. | Detailed Reasoning - 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. In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that the mere fact that visits to a country are of short duration does not of itself exclude residence in that country. The taxpayer in Case 5/2013 [2013] AAA 394; 2013 ATC 1-054 (Case 5/2013) was considered a resident of Australia despite only being present in Australia for five of the 52 weeks under consideration, as the Tribunal considered that his visits indicated that he retained a 'continuity of association' with Australia. Similarly: • the taxpayer in Sneddon's case was considered to reside in Australia notwithstanding that he had only been present in Australia in the 2008-09 income year for separate periods of only two weeks, three weeks and two and half weeks; and • the taxpayer in Iyengar's case 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. You made regular visits to Australia since 200x. Recently you have entered Australia and stayed for periods longer than 183 days. You also intend to be in Australia for more than 183 days in the recent financial year. This indicates that you have a continuity of association with Australia. | Detailed Reasoning - Purpose of visits to or absences from Australia.: During 20xx financial year you stayed in Australia for over 183 days for business purposes due to a series of problems experienced by the Y based company in which you are a Director. During that financial year, you were acting as General Manager for the Y Company whilst the permanent General Manager was on leave. You made a trip in 20yy financial year for business and medical reasons and stayed for over 183 days. You also made an annual trip from 200x to 200x and stayed in X in the unit that is left vacant for your visits. | Detailed Reasoning - Family and business ties with Australia: 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. 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. You have family ties in both Australia and Country X. You also have strong business ties in both Australia and Country X. You spouse travels with you when you visit Australia. | Detailed Reasoning - Maintenance and location of assets: Paragraph 57 of the TR 98/17 provides that occupation of a dwelling in Australia, that the individual owns or is purchasing, suggests establishment of a home in Australia. Other assets in Australia, such as motor vehicles and bank accounts, add further weight to the individual having established behaviour consistent with residing here. You live in a company-provided dwelling in Country X , and X in Australia. When you worked in Y you lived in a home unit owned by an unrelated party and rented by the Australian company of which you are a director. You have assets in Country X and in Australia. | Detailed Reasoning - Social and living arrangements: Paragraph 59 of the TR 98/17 provides that social and living arrangements such as joining sporting or community organisations, redirecting mail to Australia or committing to a residential lease during the individuals stay in Australia may indicate they are residing here. You moved to Country X some years ago and have created a large network of friends. You are a member of a sporting club and are part of the general social community there. Your do not have any have social or sporting connection in Australia. Application to your circumstances As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. Considering all the facts and information you have provided, you are considered an Australian resident for taxation purposes according to the resides test for the financial year ending 30 June 2013. Your behaviour reflected the required degree of continuity, routine or habit that is consistent with residing in Australia. Although you have a strong social connection in Country X, it does not outweigh your connections to Australia. You have family in Australia. Your spouse travels to Australia with you. You also have company provided dwellings in Australia and Country X as well as assets therefore making your business ties equally strong in both countries. | Detailed Reasoning - Domicile and permanent place of abode: 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 (section 10 of the Domicile Act 1982 ). In this regard, paragraph 21 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) states that: In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. You were born in Australia and your original domicile is Australia. You advised that you moved to Country X many years ago but have not demonstrated an intension to make your home indefinitely outside of Australia. Accordingly you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. 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. In its context in the resident definition, a 'permanent' place of abode does not have the meaning of everlasting or forever. Rather, it is used in the sense of being contrasted with a temporary or transitory place of abode outside Australia. The nature and quality of use which a taxpayer makes of a particular place of abode overseas is important ( FC of T v. Applegate 79 ATC 4307; (1979) 9 ATR 899). IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. Application to your circumstances During the 20xx financial year, you were in Australia to manage Y Company whilst the permanent manager was on leave, and supervise and improve a variety of operation problems. During this time your physical presence in Australia was 258 days You have been entering Australia from 200x to 200x and stayed mainly in X in the home unit that is left vacant for you to visit. You have travelled to Australia in the particular financial year and were physically present for more than 183 days due to business purpose and medical treatment You will be in Australia for more than 183 days in the recent financial year and intend to apply for a private ruling at that point. Whilst working in Y you lived in a company provided accommodation. In X you live in a home unit which is owned by an investment trust in which you have an interest. This property is left vacant for you to visit. Your family accompanies you when you live in Australia In Country X you live in company-provided accommodation. You have bank accounts in Australia and Country X and have assets in both countries. Considering all the facts provided by you, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. You are a resident of Australia under the domicile test. | Detailed Reasoning - 3. 183 Days Test: Where a person is present in Australia for 183 days 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. If the precondition for the application of the 183 day test is met, i.e. being in Australia for more than one half of the year of income, there is a presumption that the person is a resident. This presumption will only be defeated if the prescribed exception applies; that is, the Commissioner is satisfied that the person's usual place of abode is outside Australia and that person does not intend to take up residence in Australia. The prescribed exception has two conditions; firstly the person must have a usual place of abode outside Australia and secondly the person must not have an intention to reside in Australia. Both of these must be satisfied in order for the 183 day test not to apply. | Detailed Reasoning - Usual place of abode: The term 'usual place of abode' is not specifically defined in the ITAA 1936 or the ITAA 1997.The ordinary meaning of the word 'usual' according to the Macquarie Dictionary 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW (Macquarie Dictionary) is 'habitual or customary' and according to the Compact Edition of the Oxford English Dictionary (1987) is 'ordinarily used; constantly or customarily employed'. As stated above, the expression 'place of abode' refers to the physical surroundings in which a person lives' (see Federal Commissioner of Taxation v. Applegate 79 ATC 4307 ( Applegate ) per Fisher J, at 4317; 910) and it is often used as being synonymous with the word 'residence' (see Applegate per Northrop J, at 4313; 906). The place of abode need not be fixed but must exhibit the attributes of a place of residence or a place to live, as contrasted with an overnight, weekly or monthly accommodation of a traveller. In Executors of the Estate of Subrahmanyam v. Federal Commissioner of Taxation 2002 ATC 2303 (Subrahmanyam) , the taxpayer came to Australia on a tourist visa to seek medical treatment. The taxpayer was in Australia for a total period of 45 months. The taxpayer disposed of her home in Singapore one month after she first arrived in Australia. Although the taxpayer retained both professional and personal connections with Singapore, the tribunal found that the taxpayer did not have an abode in Singapore because the home the taxpayer was living in was disposed of when she came to Australia. As such, the taxpayer did not have a usual place of abode in Singapore. | Detailed Reasoning - Application to your circumstances: You were born in Australia. You are a citizen of Australia. You moved to Country X many years ago. From certain month in the relevant year, you were in Australia to Act as General Manager for the Y Company whilst the permanent General Manager was on leave and to supervise and improve a variety of operational problems. During this time your physical presence in Australia was for 258 days Whilst working in Y you lived in a home unit owned by an unrelated party and rented by the Australian company of which you are a director. In X you lived in a home unit which is owned by an investment trust in which you have an interest. This property is left vacant for you to live in when you travel to X. In Country X you live in an apartment which is owned by one of the trading companies in Country X in which you have interest. Although you have a place of residence in Country X that is kept vacant for your return, you also have a unit in Australia that is kept vacant for your return. Your accommodations in Australia and Country X are all provided by companies in which you have an ownership. From the facts you have provided it is considered that you do not have a usual place of abode. You have a number of places available which you regularly occupy. | Detailed Reasoning - Intention to take up residence in Australia: The phrase 'taking up residence in Australia' is not specifically defined in ITAA 1936 or ITAA 1997. The ordinary meaning of the word 'residence' according to Macquarie Dictionary is "the place, especially the house, in which one resides; dwelling place; dwelling". Various court cases have considered the place of residence of an individual. In Koitaki Para Rubber Estates Limited v. Federal Commissioner of Taxation (1941) 64 CLR 241 at 249 , Williams J: 'The place of residence of an individual is determined, not by situation of some business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settle or usual abode.' To take up residence in Australia is to connote some degree of continuity and enduring relation with Australia and having a settled or usual abode in Australia. Indicators of an intention to take up residence in Australia includes, but are not limited to, applying for a permanent visa, obtaining long term employment in Australia and purchasing or renting a dwelling to set up a home in Australia. | Detailed Reasoning - Application to your circumstances: You were born in Australia. You are a citizen of Australia. You moved to Country X many years ago. From certain month in the relevant year you were in Australia to act as General Manager for the Y Company whilst the permanent General Manager was on leave, and supervise and improve a variety of operational problems. During this time your physical presence in Australia was for 258 days From 200x to 200x you have travelled to Australia and stayed mainly in X in the home unit that is left vacant for you to visit. You will be in Australia for more than 183 days in the recent financial year and intend to apply for a private ruling at that point. Whilst working in Y you lived in a home unit owned by an unrelated party and rented by the company. In X you lived in a home unit which is owned by an investment trust in which you have an interest. This property is left vacant for you to live in when you travel to X. In Country X you live in an apartment which is owned by one of the trading companies in Country X in which you have interest. Base on the facts provided by you the Commissioner is satisfied that you have some degree of continuity and enduring relation with Australia. | Detailed Reasoning - 4. Superannuation Test: This test only applies to persons eligible to contribute to the Superannuation fund for Commonwealth government officers or their spouses or their children under the age of 16 years. Application to your circumstances As neither you nor your spouse has ever been employed by the Commonwealth government, you are not a resident under this test. | Detailed Reasoning - Your residency status: As you meet at least one of the tests, you are a resident of Australia for tax purposes during the time you were in Australia.