Private ruling: Residency
Published: February 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2010

Ruling: Question and answer: | Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: You are a citizen of Australia. You have lodged prior year income tax returns as a resident of Australia for taxation purposes. Your country of origin is country X. Your spouse's country of origin is also country X. Most of you and your spouse's family are still in country X. You departed Australia in the 2008-09 financial year. You have a country Z Work Permit with multiple entries. You hold both country W and Australian passports. You held an employment contract in country Z for over 2 years, however further employment opportunities in the same country and region are considered likely. You anticipate that this will continue well into the foreseeable future for a minimum of at least 3 years. You recently resigned from your previous position in country Z to take up a position in country W which requires you to reside in country W for a period of a number of months prior to returning to country Z for a number of years. Whilst in country Z you lived permanently in a unit which had been allocated by your employer for your exclusive use and thus became your primary residence. This accommodation was provided as part of your employment contract. The unit was fully self-contained with no share facilities and forms part of a complex of units which is under a lease agreement by your employer. Due to this arrangement you did not purchase a property in country Z. You intend to reside overseas for the foreseeable future. You are most likely to perform your duties based in the same region for the foreseeable future and probably until you retire. When you return to country Z it will be in another city, therefore you will be looking to rent apartment style accommodation for the duration of your tenure. You take personal belongings overseas with you: clothing, books, family memorabilia etc. You return to Australia intermittently to attend to personal matters and remain out of Australia for more or less 11 months of each financial year. You jointly own a house in Australia. You do not consider this to be your home because of the itinerant/nomadic nature of your employment. This is also because of changing family dynamics. The house in Australia is furnished and there is a motor vehicle. When in Australia (which has only been a few weeks in the last year), you stay in the house you jointly own. Other than the house in Australia that you jointly own, you have a membership interest in a self managed superannuation fund in Australia. Due to the hours you work, amongst other aspects, your spouse remains in Australia and visits you during off periods. You have no employment commitments in Australia. You maintain bank accounts in country Z. You do not have any other assets overseas. As your spouse is not currently working some of the income you earn while out of Australia is forwarded to your spouse to fund basic needs and lifestyle, as well as maintenance of the house in which your spouse lives. You do not intend to move back to Australia on a permanent basis for the foreseeable future due to your employment commitments. It is highly unlikely that you will apply for permanent residency in country Z. You spend part of your leave periods in Australia and the balance in various overseas locations. You do not have any dependant children living with you. You are neither separated nor divorced. You do not have any social or sporting connections with Australia. You attended and participated in numerous sporting activities and social functions in country Z. You do not hold any affiliation memberships. Neither you nor your spouse have ever held positions with the Commonwealth Government of Australia. You are over 16 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: The definition of 'resident' is outlined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) as follows: (a) a person who resides in Australia or: · whose domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside Australia; or · who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that their usual place of abode is outside Australia and that they do not intend to take up residence in Australia; or · who is: (i) a member of the superannuation scheme established by deed under the Superannuation Act 1990 ; or (ii) an eligible employee for the purposes of the Superannuation Act 1976 ; or (iii) the spouse, or a child under 16, of a person covered by sub-subparagraph (a) or (b). The above definition, in effect, provides four tests to assist us in ascertaining whether you are a resident of Australia for taxation purposes: 1. residence according to ordinary concepts; 2. the domicile and permanent place of abode test; 3. the 183 day/usual place of abode test; or 4. the Commonwealth superannuation fund test. | Detailed Reasoning - Residence according to ordinary concepts: The primary test for deciding your residency status is whether you reside in Australia according to the ordinary meaning of 'resides'. 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'. There have been several court cases where residence according to ordinary concepts has been examined in detail. Overall, residence includes two elements: physical presence in a particular place and the intention to treat the place as home, at least for the time being, not necessarily forever. In Joachim v FCT [2002] ATC 2008, physical presence was determined to include whether or not the person has retained a continuity of association with a place, together with an intention to return to that place and an attitude that the place remains home. In a recent case Iyengar and Commissioner of Taxation [2011] AATA 856 (30 November 2011) (Iyengar's case) the AAT found the individual was a resident of Australia under the resides test because of his continuity of association with Australia by maintaining his jointly owned home in Australia and the fact that this spouse remained in that home in Australia. In reaching its conclusion the Tribunal considered the following factors: | Detailed Reasoning - Physical presence: · his family remained in Australia; · he transferred his employment income to Australia to pay his mortgage; · he returned to his home in Australia during holidays; · he retained most of his personal items in Australia; · his temporary and fixed employment contract (2 years); and · he did not purchase any substantial items of personal property whilst overseas. | Detailed Reasoning - Nationality: Ordinarily, the nationality of an individual does not weigh significantly in deciding the residency status of an individual. However, in borderline cases, this factor may play a role. In Iyengar's case the taxpayer and his family became Australian citizens in June 2003. | Detailed Reasoning - Maintenance of a place of abode: In Iyengar's case the taxpayer maintained a place of abode in Australia, being his family home, whilst he was employed overseas. The taxpayer also left behind in Australia some of his personal items, such as two motor vehicles, furniture and appliances, clothing and other household items. These factors were found to be indicative of him remaining an Australian resident. | Detailed Reasoning - Family and business ties with a country: 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. In Iyengar's case the following ties that the taxpayer had with Australia were such that he remained a resident of Australia: · his family remaining in Australia (except for the short trip to Dubai by his wife); · he maintained his family home in Australia; · he used all his foreign income to make additional payments on his mortgage; and · his holidays in Australia were at his family home. | Detailed Reasoning - Application to your circumstances: You left Australia during the 2008-09 financial year to take up an employment contract in country Z that was originally for a period of over 3 years. Your accommodation in country Z was provided as part of your employment contract and for this reason you did not find it necessary to make your own arrangements. You resigned from that position after approximately 2 years and have taken located in country W. You will be required to live in country W for a period of less than 1 year after which you will return to country Z to take up a position that is estimated to continue for a number of years. When you return to country Z you will be located in another city and you will be looking to rent apartment style accommodation for the duration of your tenure. When we examined your circumstances as they relate to Iyengar's case : | Detailed Reasoning - Physical presence: · your family (spouse) remains in Australia; · you transfer some of your employment income to Australia to support your spouse and maintain your home in Australia; · you return to your home in Australia during some of your holidays (at other times you visit other countries); · you have retained personal belongings in Australia (including household effects and a motor vehicle); · your employment contracts are temporary and fixed in duration; and · you have not purchased any substantial items of personal property whilst overseas. | Detailed Reasoning - Result of residence according to ordinary concepts test: For the last year you have only been in Australia for a total period of less than 1 month and this would indicate that you are not a resident according to ordinary concepts. You have advised that it is highly unlikely that you will apply for permanent residency in country Z and therefore you will maintain your Australian citizenship. Based on the decision in Iyengar's case we cannot overlook that you have maintained a continuity of association with Australia and therefore you continue to be a resident of Australia for taxation purposes. | Detailed Reasoning - The domicile and permanent place of abode test: As you are a resident of Australia for taxation purposes under the resides test, it is not necessary to consider whether you are a resident under any of the three additional statutory tests in section 6(1) of the ITAA 1936. However, for completeness, we will briefly examine the domicile test and how it would have applied to your facts if we had not found you to be a resident according to ordinary concepts. | Detailed Reasoning - Domicile: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside Australia. There are essentially 3 types of domicile that an individual can have: · the domicile of origin; · the domicile of choice; and · the domicile of dependency. Basically your domicile of origin is where you were born, being the country of your father's permanent home. As you were born in country X, it is therefore your country of origin. In order to show that you have chosen a new domicile of choice, you must be able prove an intention to make your home indefinitely in that country. As you are an Australian citizen, you have chosen Australia to be your domicile of choice. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind. Again referring to Iyengar's case the Tribunal considered that the taxpayer had acquired a domicile of choice in Australia by becoming an Australian citizen and purchasing a family home. This is comparable to your circumstances: you were born in country X but are an Australian citizen. You have stated that you are highly unlikely to apply for permanent residency in country Z and therefore you have retained your domicile of choice in Australia. | Detailed Reasoning - Permanent place of abode: Income Tax Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia explains that in determining a person's domicile it is necessary to consider your intention as to the country in which you are to make your home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency, for example, at the end of his or her employment. 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. If an individual with a permanent place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another or moves constantly within the same country (for example, from town to town or even from suburb to suburb) any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or a permanent place of abode outside Australia. IT 2650 provides the following factors to be taken into account: (a) the intended and actual length of the individual's stay in the overseas country; (b) any intention either to return to Australia at some definite point in time or to travel to another country; (c) the establishment a home outside Australia; (d) the abandonment of any residence or place of abode the individual may have had in Australia; (e) the duration and continuity of the individual's presence in the overseas country; and (f) the durability of association that the individual has with a particular place in Australia. When you first went to country Z your employer provided you with a unit of accommodation as part of your employment contract. The unit was fully self contained with no share facilities and formed part of a complex of units which is under a lease agreement by the employer. Because of this arrangement you did not find it necessary to purchase a property in country Z. You resigned from the position after approximately 2 years and have been living and working in country W ever since. You have commenced working on in another capacity and will remain there for less than 1 year. At the conclusion of this contract, you will be returning to country Z to take up another employment contract for a number of years. When you return to country Z it will be in another city, and you will be looking to rent apartment style accommodation for the duration of your tenure. Due to the hours you work, amongst other aspects, your spouse does not find it conducive to accompany you to these overseas locations and chooses instead to remain in Australia and visit you in your place of employment. | Detailed Reasoning - Results of the domicile and permanent place of abode test: You have retained your domicile of choice in Australia as you are an Australian citizen and you have not indicated any intention of applying for permanent residency overseas. The circumstances of your living arrangements as outlined above indicate that you have not established a permanent place of abode outside Australia. Your accommodation in country Z was provided as part of your employment contract which you abandoned when you resigned from the position. You have moved to country W and are currently living there after which you will return to another city in country Z and will be looking for apartment style accommodation there for the duration of that contract. | Detailed Reasoning - The 183 day test: Under the 183-day test, a person will be an Australian resident if they are present in Australia for 183 days during the year of income 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. Since leaving you have returned to Australia intermittently to attend to personal matters only. You remain outside of Australia for most of each year. In the last year you were in Australia for a total of less than 1 month. | Detailed Reasoning - Results of the 183 day test: You are not a resident of Australia under this test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Commonwealth Superannuation Scheme (CSS) or Public Service Superannuation Scheme (PSS), or that person is the spouse or child under 16 of such a person. | Detailed Reasoning - Results of the superannuation test: In your case, you are not a member of the CSS or the PSS or a spouse of such a person. You are over 16 years of age. Therefore, you are not a resident under this test. | Detailed Reasoning - Your residency status: For the reasons outlined above you remain a resident of Australia for taxation purposes under residence according to ordinary concepts test outlined in subsection 6(1) of the ITAA 1936.

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