Private ruling: Residency
Published: July 2013
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

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

Relevant facts and circumstances: You were born in Australia and are a citizen of Australia. You do not have a spouse or children. You have been working for your Australian employer in country X for a number of years. Your previous employment contract ran for two years. Your contract has been renewed for another two years and you expect it to be extended by a further two years. A clause of your employment contract states that after your overseas 'secondment', you will return to your previous ongoing position with your employer in Australia. A clause of your employment contract states that you will receive an annual salary and a daily overseas allowance while you are working in country X. A clause of your employment contract states that while you are residing off shore in the performance of your employment contract you will be considered a non Australian resident for taxation purposes, and as such your employer will not withhold Australian taxation instalments from your salary. It is your responsibility to lodge any necessary documentation to substantiate your non resident status with the Australian Taxation Office. A clause of your employment contract states that your employer will provide for the cost of travel by you from country X to Australia for two return trips per year. A clause of your employment contract states that your employer will provide you with accommodation in country X or an accommodation allowance should you wish to organise your own accommodation. A clause of your employment contract states that you will be covered by Australian worker's compensation while performing your duties under the contract. A clause of your employment contract states that you will be provided with insurance coverage for personal accident, illness, public liability and overseas travel risk. A clause of your employment contract states that your employer will make superannuation payments on your behalf. Your salary is paid in Australian currency into your Australian bank account as it is not possible for your employer to pay you in country X currency. You have access to your bank account in country X. You pay tax on your salary to the country X government. You hold a country X residency visa. Subject to your ongoing employment with your current employer, you intend to live in country X until you retire. You will then return to live in Australia. You are renting an apartment in country X on a two year lease with the option of a third year. You moved into this apartment when the lease on your previous apartment expired. You rented your previous apartment on a two year renewable lease arrangement. You have accumulated various household items for your apartment in country X which include furniture, decorations, kitchen appliances and electrical entertainment systems. You have a bank account in country X. On your Australian immigration outgoing passenger card you stated that you were going overseas for business/work. In the last few financial years you returned to Australia twice each year on annual leave for total periods between six to eleven weeks. On your return visits to Australia you visited your family and friends. You also undertook training on some of these visits. On your return visits to Australia you stayed at the dwelling you co-own with another person. You use your Australian bank account to make regular mortgage payments in Australia to support the purchase of your share in the house you co-own. The other person continues to occupy the co-owned dwelling and has responsibility for its management and maintenance. The household effects you own in Australia remain in the co-owned dwelling. You own a car in Australia which is used by a relative. You have access to the car when you visit Australia on your return visits. You have a superannuation fund in Australia. You are not a member of the Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation Schemes (PSS). You have had your name removed from the Australian electoral role, cancelled Medicare and resigned from all associations and clubs you were involved with in Australia. In country X, you are a member of a business organisation. You are also a member of a sporting club and play in a weekly sporting competition.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(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. In part, subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) states that: resident or resident of Australia means: a person, other than a company, who resides in Australia and includes a person: (i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia; (ii) 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 the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or (iii) who is: (A) member of the superannuation scheme established by deed under the Superannuation Act 1990 ; or (B) an eligible employee for the purposes of the Superannuation Act 1976 ; or (C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B) Based on the definition cited above, there are four tests of residency: · the 'resides' test; · the 'domicile' and 'permanent place of abode' test; · the 183 day test; and · the Commonwealth superannuation fund test. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of 'resident' beyond the 'resides' test. Whether you are a resident of Australia for Australian taxation purposes under these tests is determined based on the facts of the particular case. Thus, it is not possible to provide general advice regarding residency which will be applicable in all cases. | Detailed Reasoning - The resides test: In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; ( 2002) 51 ATR 1173 at paragraph 43-44 , it was determined that the word ' resides' should be given the widest meaning. There have been a number of factors identified which can assist in determining if a particular taxpayer 'resides in Australia. According to paragraph 20 of Taxation Ruling 98/17: Income tax: residency status of individuals entering Australia (TR 98/17), factors to be considered in determining residency in Australia are: · intention or purpose of presence; · family and business/employment ties; · maintenance and location of assets; and · social and living arrangements. Paragraph 21 of TR 98/17 further states that: No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances. Recent case law decisions have expanded on the list of factors identified in TR 98/17. Case 5/2013 [2013] AAA 394; 2013 ATC 1-054 (Case 5/2013) and Sneddon v FC of T [2013] AATA 516; 2012 ATC 10-264 (Sneddon's case), for example, considered the following factors in relation to whether the taxpayer resided in Australia: (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. Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1) of the ITAA 1936. | Detailed Reasoning - (i) Physical presence in Australia: As indicated in Iyengar v FC of T [2011] AATA 856; 2011 ATC 10-222 (Iyengar's case), there is a requirement that you at least be physically present in Australia for part of an income year. Over the previous few years, you have visited Australia on two occasions in each year and been present here for total periods of six to eleven weeks each year. There is no reason to believe that your yearly return visits to Australia will cease in future years. By comparison, the applicant in Case 5/2013 was considered a resident of Australia despite only being present in Australia five of the 52 weeks under consideration, as his visits were said to: …indicate that the Taxpayer retained a "continuity of association" with Australia, together with an intention to return to Australia and an attitude that Australia remains "home". Similarly, in Pillay v FC of T [2013] AATA 447; 2013 ATC 10-324, although the taxpayer had been working for an extensive period in East Timor, and although he had had an apartment to stay in while he had been working there, he did not seem to have brought himself to regard East Timor as home. His connection with East Timor appeared to be one based almost entirely on his employment arrangement. He did not express an intention to remain in East Timor after his employment ended. It was the 'continuity of association' that he had retained in Australia that was significant in the Tribunal's finding that the taxpayer was residing in Australia. Thus, the fact that you: · have been physically present in country X for the majority of the previous five years; and · will in the next few years continue to be physically present in country X for the majority of any income year is not sufficient in itself to establish that you are not a resident of Australia. | Detailed Reasoning - (ii) Nationality: While you are an Australian citizen, this is not in itself sufficient to establish that you are an Australian resident for tax purposes. | Detailed Reasoning - (iii) History of residence and movements: You have been living and working in country X for the majority of each of the last five income years. | Detailed Reasoning - (iv) Habits and "mode of life": The taxpayer in Case 5/2013 resided in a serviced apartment in Singapore and fully-furnished quarters provided by his employer in India; and the taxpayer in Sneddon's case had a fully-furnished apartment leased by his employer. You have been living in rented apartments which were available for your exclusive use, and for which you receive an accommodation allowance from your employer. Unlike the taxpayers in Case 5/2013 and Sneddon's case, however, you have had exclusive use of the apartments for some years. Unlike the taxpayer in Bezuidenhout v Commissioner of Taxation [2012] AATA 799 (Bezuidenhout's case), you do not remit the bulk of your overseas employment remuneration to Australia to maintain your family. However, similarly to Iyengar's case and Sneddon's case you remit funds to meet your Australian mortgage obligations. Unlike the taxpayers in Iyengar's case and Sneddon's case who worked overseas after accepting offers from new employers, you moved to country X with your existing Australian employer, and are still working for that employer. Your employment contract states that your country X placement is a 'secondment' and after you cease working there you will return to your previous ongoing position in Australia. Your salary continues to be paid into your Australian bank account, your employer continues to pay superannuation on your behalf, you continue to be covered by Australian worker's compensation and your employer provides you with insurance coverage for personal accident, illness, public liability and overseas travel risk. Although you are working overseas you are still being paid from Australia. Your employer also provides you with two return trips to Australia each year. You have had your name removed form the Australian electoral role and cancelled Medicare which is indicative of you no longer residing in Australia. However, in the case of Medicare, it can be said that this was no longer necessary anyway as your employer has provided you with personal accident and illness insurance cover. You have resigned from all associations and clubs you were involved with in Australia. In country X, you are a member of a business organisation. You are also a member of a sporting club and play in a weekly sporting competition. It can be seen that you are socially active in the local country X community. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You have returned to Australia twice each year over the previous few years. You have taken annual leave from your employment and your employer has provided for the cost of your travel from country X to Australia for two return trips per year. As stated above, the taxpayer in Case 5/2013 was considered a resident of Australia despite only being present in Australia five of the 52 weeks under consideration. Equally: · 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. However, it should be noted that you have continued to remain in country X for a significant majority of each of the last three income years. You intend to continue this until you retire and return to Australia to live. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: As indicated above, the reason for your absence from Australia for the majority of the previous five years is your placement with your Australian employer in country X. Subject to contract renewals, this may continue until you retire. The reason for your presence in Australia in the last three years has been to visit your family and friends. You have also undertaken training on some of these visits. As noted above, there is no reason to believe that your twice yearly return visits to Australia will cease in future years. | Detailed Reasoning - Family: It is significant that in the recent decisions regarding the residency status of persons working overseas, including Bezuidenhout's case, Case 5/2013, and Iyengar's case, the taxpayers had both a spouse and children residing permanently in Australia. There is particular emphasis placed in these decisions on the taxpayers' Australian residence being the 'family home'. 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. By contrast, you do not have a spouse or children. Thus, you do not have a 'family' that resides in Australia in the same way as the taxpayers in the cases recently considered. However, of course, your extended family resides in Australia as previously noted. You have no family in country X. | Detailed Reasoning - Business or economic: In terms of 'business' or economic ties, the recent cases considering residency concerned taxpayers who were on short term employment or independent services contracts. This contrasts with your situation where you have been employed with your existing employer in country X on an ongoing basis for the last five years. You entered into a new employment arrangement involving two year renewable contracts and you are hopeful of this arrangement continuing until you retire. Although you are performing your employment duties in country X, you are still working for your Australian employer, your salary is being paid into your Australian bank account and your employer is paying Australian superannuation on your behalf. You do not intend to undertake any employment in Australia in the future, however, should your employer not renew your country X employment contract, you will be required to return to work in Australia. The only income from any source you receive is the remuneration from your Australian employment contract. Under your employment contract, your employer will provide you with accommodation in country X or an accommodation allowance should you wish to organise your own accommodation. You have chosen to establish your own furnished rental accommodation in country X rather than stay in accommodation provided by your employer. | Detailed Reasoning - Assets: Like the taxpayers in Sneddon's case and Iyengar's case, you have retained ownership of the motor vehicle owned in Australia after moving overseas to work, and like the taxpayer in Iyengar's case , you have retained ownership of furniture contained in your Australian property. Although you have purchased household furniture and electrical items for your apartment in country X, you have substantially more assets in Australia by way of your house, vehicle, furniture and superannuation fund. Furthermore, like the taxpayers in Bezuidenhout's case, Sneddon's case and Iyengar's case, your house is not rented out and it is available for you to live in while you are in Australia. In this regard, your situation is much like the taxpayers in the recent cases considering residency, as previously mentioned. | Detailed Reasoning - (viii) Maintenance of place of abode: Like the taxpayers in Bezuidenhout's case, Sneddon's case and Iyengar's case you have a dwelling available to stay in on your return visits to Australia. You maintain a property in Australia of which you co-own with another person. However, it is only this person who lives in this residence on a permanent basis, with your rented accommodation in country X being the place where you spend the majority of each income year. | Summary: As stated in paragraph 21 of TR 98/17: No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances. There are some factors considered above which would indicate that you have ceased residing in Australia, such as: · you have been living and working in country X for five years and intend to do so until you retire · you spend the majority of each year living and working in country X · you have established and furnished your own accommodation in country X · you have established business, social and sporting connections in country X · you have had your name removed from the Australian electoral role, cancelled Medicare and resigned from all associations and clubs you were involved with in Australia Although you have a longer, more settled association with the foreign country you are working in than the taxpayers mentioned in the recent Court and AAT decisions, it is considered that you have a continuity of association with Australia that is similar to those considered in the recent decisions. This is evidenced by: · your intention to return to Australia to live once your employment in country X ceases · the provision in your contract that specifies that you must return to work in Australia should your contract not be renewed · your regular, albeit, twice yearly return visits to Australia · your maintenance of a furnished place of abode in Australia that you stay in on your return visits · meeting your Australian mortgage payments from your salary Further, the other taxpayers mentioned took up employment offers from new employers, where you accepted an overseas placement with your existing employer. Based on a consideration of all of the factors outlined above, it is concluded that you are residing in Australia in accordance with the ordinary meaning of the word. Therefore, you will be a resident under the resides test of residency for the relevant income tax years. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.