Private ruling: residency
Published: May 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: In the 2013-2014 income year

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

Relevant facts and circumstances: You were born in foreign country A and obtained permanent residency in Australia upon arrival in 1963. You became naturalised Australian. Your spouse has accepted an employment contract which will mean relocating to foreign country B. The contract will be effective from a date until a date, with the possibility of extinction. Your spouse relocated to foreign country B on a date. You will relocate to foreign country B to be with your spouse from a date to a date, unless your spouse's employment contract is extended. Your spouse's employer will obtain a business visa for your spouse and a temporary visa for you. These visas will not allow you and your spouse to stay permanently in foreign country B. The visas are only valid for the length of your spouse's employment, but may be extended if the employment contract is extended. You and your spouse will remain resident in foreign country B for the term of his employment contract. You formed the intention of making a home outside Australia indefinitely when your spouse accepted the offer of employment in foreign country B. In Australia, you and your spouse resided at an address. This house will not be rented out as it is on the market to be sold. It is the only real property owned or controlled by you and your spouse. You will return to Australia approximately every three months to inspect your current home. These trips will be very brief in duration. Your only other assets in Australia are accounts held with a bank: • a cheque account • two savings accounts • a credit card and • a mortgage account. Funds will be transmitted monthly to your accounts to cover mortgage repayments and necessary insurances and other bills. Personal vehicles in Australia will be placed in long term secure storage and household effects will follow on the sale of the house. You and your spouse's asset overseas will be a bank account. You do not hold a return airline ticket to Australia. The only income either will receive from Australia will be minimal bank account interest. You do not have a position or job being held for you in Australia. No one else will accompany you and to foreign country B; you do not have any family. The only social and sporting connections you have with Australia are personal. The only social and sporting connections you will have with foreign country B are those gained through your spouse's employment and any voluntary work you are permitted to do. Neither you nor your spouse has ever been a Commonwealth Government of Australia employee for superannuation purposes. Both you and your spouse are over 16. Depending on the ruling decision, you will advise Australian companies with whom you have investments that you are foreign resident. Depending on the ruling decision, you will advise Medicare and your health insurer to have your name removed from their records. However, you may continue to pay for your private health insurance to retain your lifetime cover. When completing the outgoing passenger card you will put as your reason for going overseas to join and live with your spouse in foreign country B. You completed the Australian Electoral Commission's "Overseas notification form" (copy provided). On this form you have stated that your absence will be temporary and that you expect to be overseas from a date to a date.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(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' and 'permanent place of abode' test; • the 183 day test; and • the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. 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 considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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 with Australia compared to the foreign country concerned; and (viii) maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35): Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): 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. Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62): Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1. You relocated to foreign country B to be with your spouse from a date to a date, unless your spouse's employment contract is extended. | Detailed Reasoning - (ii) Nationality: You became a naturalised Australian. | Detailed Reasoning - (iii) History of residence and movements: You lived in Australia prior to moving to foreign country B on a date. You have a temporary visa which does not allow you to stay permanently in foreign country B. The visa is only valid for the length of your spouse's employment, but may be extended if the employment contract is extended. | Detailed Reasoning - (iv) Habits and 'mode of life': You have lived with your spouse in foreign country B since on a date. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You will return to Australia approximately every three months to inspect their current home. This house will not be rented out as it is on the market to be sold. These trips will be very brief in duration. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: You will return to Australia for brief visits, approximately every three months, to inspect your current home which is on the market to be sold. | Detailed Reasoning - (vii) Family, business and financial ties: Family You have no family in Australia. Business or economic You have (with your spouse) a dwelling in Australia which is not being rented as it is on the market to be sold. You relocated to foreign country B to be with your spouse from a date and will remain with him there for the duration of your spouse's employment. You will have funds transmitted monthly to Australia to cover mortgage repayments and necessary insurances and other bills. You do not have a position or job being held for you in Australia. Assets You own a house in Australia (with your spouse) which is on the market to be sold. It is the only real property owned or controlled by you. Your other assets in Australia are accounts held with a bank: • a cheque account • two savings accounts • a credit card and • a mortgage account. Your only asset overseas will be a bank account held jointly with. | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: In Australia, you own a house in Australia (with your spouse) which is on the market to be sold. You lived in this house with your spouse before moving to foreign country B. | Detailed Reasoning - Summary of the resides test: As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically: • you have a visa which allows you to stay in foreign country B while your spouse is employed there and you are not a permanent resident of any other country • you became naturalised Australian and will remain so while in foreign country B • you maintain several accounts in Australia with a bank and have funds transmitted monthly to Australia to cover mortgage repayments and necessary insurances and other bills • you have a dwelling in Australia that is available for your use. 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 while in foreign country B. Therefore, you will remain a resident of Australia under the 'resides' test. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. 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. A domicile of choice is adopted when you become a citizen of a new country or apply for permanent residency in a new country. You were born in country A but became a naturalised Australian in the 1980s. Therefore, your domicile of choice is Australian. As you will remain a citizen of Australia while living in the country B, your domicile of choice is Australia and remains unchanged. 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. 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. The taxpayers in Iyengar's case and Boer v. Federal Commissioner of Taxation [2012] AATA 574; 2012 ATC 10-269 ( Boer's case ) lived in employer provided accommodation overseas which was not indicative of them establishing or maintaining their 'own' accommodation. This aspect was a contributing factor to them being unable to establish that they had a 'permanent place of abode' overseas. As previously mentioned, your continuing presence in country B will be dependent on your spouse's employer sponsored work residence permit. Should your spouse's employment cease for any reason, you will be required to leave the country. Although it is your intention to live in country B on an ongoing basis, the duration and continuity of your presence is contingent on your spouse's continued employment. This makes your presence in country B temporary in nature. You have not established a permanent place of abode in country B as your presence in country B is temporary in nature. You cannot establish a permanent place of abode when your presence in a place is temporary. Therefore, you will be a resident of Australia under the 'domicile and permanent place of abode' test of residency. | Detailed Reasoning - Your residency status: As you have past the resides and domicile tests of residency, you will remain a resident of Australia for tax purposes while in foreign country B.