Private ruling: Residency
Published: August 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2009

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

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are an Australian citizen. You departed Australia to take up employment with an overseas company situated in Country X. You have an employment contract and the duration of your contracts vary subject to various projects you work on and their completion dates. You plan to return to Australia at the end of your working career. You pay income tax in Country X. You work in high risk environments in very dangerous places subject to unrest. In your latest employment contract you work about 2 months on and have then have just over a week off. You are married and have no dependant children. Your spouse remains in Australia because where you work in Country X is too dangerous for your spouse. Your spouse lives in a house owned by you and that is where you stay when you return to Australia. Your assets in Australia include your family home, rental property, land, bank account and investment account. In Country X you live in employer provided accommodation based at your work site. Your accommodation may consist of single tented accommodation with shared facilities. You are required to stay on site and attend work duties at short notice. You do not have any assets overseas as all of your assets are located in Australia. You have not remained on the Australian electoral roll. You and your spouse are not contributing members of Commonwealth of Australia superannuation funds.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6-1, | Income Tax Assessment Act 1997 Section 6-5 and | Income Tax Assessment Act 1997 Section 995.

Reasons for decision: Summary: Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose of the Income Tax Assessment Act 1936 (ITAA 1936). The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the 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. 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - The resides test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'. Taxation Ruling TR 98/17 focuses on the quality and character of an individual's behaviour while in Australia (which includes, in addition to family and business ties, factors such as intention or purpose of presence, social and living arrangements, and maintenance and location of assets), in conjunction with the period of physical presence in Australia. Taxation Ruling 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. In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. In your case, your ties to Australia are stronger because your spouse resides in Australia, and you return to your family home in Australia when you are not working. The main purpose of your presence in Australia is to be with your family, whereas the main purpose of your presence in Country X is to work. This indicates that you are residing in Australia according to the ordinary meaning of resides. As you are residing in Australia, you are a resident of Australia under the resides test. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. 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, for example 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 have maintained your Australian domicile because: · You are an Australian citizen and your country of origin is Australia · You are not a citizen of any other country · You intend to return to Australia at the end of your working career Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia. | Detailed Reasoning - Permanent place of abode: 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. It is clear from Applegate and Jenkins 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. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which have been considered relevant by the Courts and Boards of Review/Administrative Appeals Tribunal and which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: · the intended and actual length of the taxpayer's stay in the overseas country; · 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; · 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; · whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; · the duration and continuity of the taxpayer's presence in the overseas country; and · the 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. The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive. The Commissioner is not satisfied that you have a permanent place of abode outside Australia because of the factors provided under the resides test. Based on these facts, the Commissioner is not satisfied that you have established a permanent place of abode outside Australia you are a resident of Australia for tax purposes under the domicile test. | Detailed Reasoning - Your residency status: You are a resident of Australia for taxation purposes under the resides test and the domicile test. You are required to declare your income both in and out of Australia in your Australian tax return. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.