Private ruling: Residency status
Published: February 2014
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2011

Ruling: Question and answer: | Are you a resident of Australia for income 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 were born in country D and are a citizen of Australia and country C. You are divorced and with adult children. You have worked in a number of countries over a number of years. During the periods that you were on leave or between work assignments you returned to your family home in Australia. You entered each of these counties on working visa's that were provided by your employer. The purpose of each of the overseas trips was for work/employment purposes. While working overseas you lived in accommodations that were supplied by your employer. They ranged from shared accommodation to the sole use of an apartment. You recently began an employment contract for an extended period with company XYZ who are located in country F. The XYZ employment contract contains the following provisions; · a provision for an extension for a number of years; · an expansive travel allowance; · fully furnished accommodation; · payment of essential domestic utilities such as power, water rates and gas; and · 35 days annual leave. During your current employment assignment you intend to return to Australia annually for short periods to visit family. When you return to Australia you stay in hotels and holiday apartments. Your overseas assets consist of a bank account in the country F which your salary is paid into and some of your personal effects. Your assets in Australia consist of a bank account, a block of land and the remainder of your personal items which are currently in storage. The foreign sourced income that you derive is being used to pay the mortgages on a block of land in Australia and your ex-spouses home. In addition it is also being used to support your children's tertiary education. You have been stating on your immigration outgoing passenger card that you were an Australian resident departing temporarily, as you were waiting for a determination from the ATO as to your residency status. You do not have any social or sporting connections with neither Australia nor any of the countries that you have been employed in. You have not advised Medicare, your private health insurer or any Australia financial institutions that you are a foreign resident because you are waiting for a ruling from the ATO before advising. You intend to remain in country F until retirement at which time you will decide whether you wish to return to Australia to retire.

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

Reasons for decision: Detailed Reasoning - Residency: An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes 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 NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia . 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 an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests. | 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. Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia , identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes. According to paragraph 20 of 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 and Sneddon v FC of T (Sneddons 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). | Detailed Reasoning - Physical presence in Australia: A person does not necessarily cease to be a resident of a particular place just 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 ( Joachim v Federal Commissioner of Taxation 2002 ATC 2088, at 2090). In recent court cases taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia. In Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 ( Iyengar's Case ), it was indicated that there is a requirement that you at least be physically present in Australia for part of an income year. Further in this case it was considered that the taxpayer remained a resident of Australia for income tax purposes even though during the period he was working overseas (2 years and 7 months) he had only returned to Australia for a two week period and for a 10 day period. In your case, you intend to return to Australia annually for short periods. While it is acknowledged that this presence is relatively brief, consistent with the principles established in the Iyengar's case , we consider that this presence will be sufficient to demonstrate that you will be maintaining an ongoing continuity of association with Australia. | Detailed Reasoning - Nationality: In Iyengar's Case , it was noted that in most cases, the nationality of a person would not be a factor to be taken into account along with other circumstances in determining where his or her residence is. However, in cases that could go either way, the citizenship of a person may not be completely irrelevant in the conclusion to be drawn from all the relevant facts In your case, you were born in country D and are a citizen of Australia and country C. While employed in the country F you are provided with a temporary resident visa by your employer. | Detailed Reasoning - History of residence and movements: In Iyengar's Case , the Tribunal noted that both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident (for taxation purposes) in a country in a particular income year. Significant in Iyengar's Case is that when he for filled a long term overseas employment opportunity he would return to his home in Australia for a break before leaving Australia and taking on another overseas employment opportunity. In your circumstances, you were born in country D before moving to Australia. After moving to Australia you married and had children. During this period you developed a pattern of being employed in different countries for varying periods of time. What is significant is that during periods of leave or in between employment assignments you consistently returned to Australia to be with your family. During your current employment contract you are intending to return to Australia annually for short periods to spend time with your family. These circumstances are very similar to those to the taxpayer in I yengar's Case who was found to be a resident of Australia for income tax purposes . In light of the above and based on the principles established in Iyengar's Case , your history of residence and movements are not consistent with someone who is no longer residing in Australia. | Detailed Reasoning - (iv) Habits and "mode of life": In recent cases a taxpayer's habits and mode of life in the country where they are/had been living were considered when determining whether a taxpayer continued to be a residence of Australia for income tax purposes. In Sneddon's Case, the taxpayer who was found by the court to be a resident of Australia for tax purposes lived in a fully-furnished apartment leased by his overseas employer. The taxpayer's only expenses were his everyday living expenses and some furniture and household items that he purchased to make the fully-furnished apartment, provided by his employer more comfortable. Further his employment income was paid in Australian dollars into an Australian bank account and predominantly used to meet his Australian obligations. Your case is simular with the taxpayer in Sneddon's Case. Your employers have provided you with fully furnished lodgings in all of the countries that you have been employed in. With reference to your current employment in country F, your employment contract contains the provisions for a fully furnished apartment. Further your employer also pays all domestic utilities such as power, water rates and gas. In addition, although you are remunerated through a country F bank account, part of your overseas remuneration is transferred to Australia in order to meet your mortgage obligations and support your children's tertiary education endeavours. In considering the above and based on the findings in Sneddon's Case , your habits and mode of life are consistent with someone who has not ceased to be a resident of Australia for tax purposes for the years contained in this ruling. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 ( Lysaght's Case ) the Court noted that mere fact that visits to a country are of short duration does not of itself exclude residence in that country. Further as previously discussed, when considering the issue of return visits to Australia by a taxpayer who was living and working overseas, the Tribunal in Iyengar's Case also noted that the brevity of a visit to a particular country compared to length of time spent abroad does not of itself exclude an individual from being a resident in the country visited. Further, 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 and was also considered to a resident of Australia for income tax purposes. Your current employment contract contains a provision for an expansive travel allowance. Stated in your employment contract is that this allowance is available to you to enable you to be reunited with family in Australia. During your current employment contract you intend to return to Australia annually for short periods to visit your family. Considering the above and the principles established in Iyengar's Case and Lysaght's Case , we do not consider the frequency, regularity and relatively short duration of your visits to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes post your departure from Australia. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: In Iyengar's Case, the evidence was that Mr Iyengar's intention was to go to Dubai (and later Doha) and work for Maersk for as long as it took to complete his contract and then to return to Australia, which he did. His motivation for doing so was to use the money he earned under the Contract to pay down the mortgage on the Winthrop home as soon as possible. Such an intention (and motive) is indicative that Mr Iyengar was an Australian "resident" in the relevant period. In considering the purpose of your absences from Australia, you have stated your absences from Australia are for work purposes and that the purpose for your return visits are to visit family. Further when completing your immigration outgoing card you have stated that you are an Australian resident departing temporarily for work purposes. Although you have stated that you have done so as you were waiting for a determination from the ATO about your residency status, any such determination is not relevant when filling out an immigration outgoing card. In addition, the remuneration that you receive from your foreign employment is being used to pay off the mortgages of your block of land and your ex-spouses home which are both located in Australia. This pattern of behaviour is consistent with that of the taxpayer in Iyengar's Case who was determined to be a resident of Australia for income tax purposes . In light of the above, your actions are sufficient to preclude you from being considered a non-resident of Australia for taxation purposes in each of the income years included in this ruling. | Detailed Reasoning - (vii) Family, assets, business ties to Australia and the overseas country or countries: In Iyengar's Case , the court held that, despite the fact that Mr Iyengar spent almost 2 years and 7 months working in Dubai and later Doha for Maersk, his family ties with Australia were such that he remained a "resident of Australia" in the relevant years of income. That is, after moving to Australia from India in 1998 he and his family took the step of becoming Australian citizens 2003 and acquiring a home in about 2003. While he was overseas working on the Contract for Maersk, his wife, daughter and son remained in Australia (except for three short visits to Dubai by his wife), his most substantial asset (the Winthrop home) was located in Australia, he used almost all of the money he earned abroad to make accelerated payments on his Australian mortgage on the Winthrop home (which he acknowledged he considered to be the "family home") and he took his holidays (albeit short) in Australia at the Winthrop home with his family: Shand and Crockett. In your case, you have been engaged in foreign employment for a number of years and more recently have accepted an employment opportunity in country F. Your ex-spouse and adult children have remained in Australia. Your most substantial assets are your block of land and some personal items that are located in Australia. The income that you derive from your overseas employment is being used in part to pay your Australian mortgage commitments and help support your adult children in Australia in their tertiary pursuits. Further you have no substantial overseas assets. In applying the principles established in Iyengar's Case to your particular circumstance, although it is acknowledged that your income is foreign sourced, your ties in terms of family and material assets are far more substantial in Australia than overseas. In considering your circumstances and consistent with the principles established in Iyengar's Case , your family, assets and business ties to Australia preclude you from being considered non-resident for income tax purposes. | Detailed Reasoning - Maintenance of Place of abode: In Iyengar's Case , the court held that another important factor in determining whether or not a person has ceased to be resident in a particular country is whether the person maintains a 'place of abode' in that country, whether owned by them or not, when they are absent from that country. In Australia, the maintenance of a home in a particular place has usually arisen in relation to the question whether the taxpayer had a "permanent place of abode" outside Australia within the meaning of the first statutory test (the domicile test) in section 6(1)(a)(i) of the ITAA 1936. When you return to Australia you live in hotels and holiday apartments and are not maintaining a place of abode in Australia. | Detailed Reasoning - Conclusion: It is acknowledged that your presence in Australia has been for brief periods and that you are not maintaining a place of abode in Australia. With regards to the remaining factors and the findings in recent case's including Sneddon's Case, Iyengar's Case and c ase 5/2013 , all of whom were found to be residents of Australia for income tax purposes the following are significant. Your employer supplies you with your accommodation and pays essential utilities expenses while you are employed in country F. You intend to continue to return to Australia annually for short periods. You have remained a citizen of Australia. Your ties in terms of family and material assets are far more substantial in Australia than overseas. Significantly, you are transferring your foreign sourced income in part to Australia in order meet your mortgage commitments and support your children through their tertiary education endeavours. In doing so you are continuing to grow your asset wealth in Australia. In consideration of all of the factors outlined above, it is concluded that you will continue to be a resident of Australia under the 'resides test' for income tax purposes during the income years that are included in this ruling. Whilst is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you 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. 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 prove an intention to make his or her home indefinitely in that country. In your case you were born in country D, therefore your domicile of origin is country D. You then moved to Australia and became an Australian citizen and in doing so electing Australia as your domicile of choice. You have not demonstrated any intention of becoming a citizen or permanent resident of the country F, therefore your Australian domicile remains unchanged. 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. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: a) the intended and actual length of the taxpayer's stay in the overseas country; b) 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; c) 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; d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; e) the duration and continuity of the taxpayer's presence in the overseas country; and f) 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. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: 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… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. Your circumstances are as follows: · you have exhibited a pattern of been employed overseas for over a number years in a number of countries for varying periods; · more recently you left Australia to begin an employment contract in country F for an extended period with a provision for an extension for a number of years; · you intend to work in the country F until you retire; · while in the country F you live in employer provided accommodation; · your employer pays for all essential domestic utilities such as power, water rates and gas; · your assets in Australia consists of a block of land, a bank account and some personal items that are in storage; · when you depart Australia the reason you put on your outgoing immigration card is that you are departing temporarily; · you have not advised Medicare, your health care provider or any financial institutions that you had left Australia for an indefinite period; · your children whom are undertaking tertiary education have remained in Australia. Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour is not consistent with someone establishing a permanent place of abode outside of Australia. Significant in reaching this conclusion is that you live in employer provided accommodation and your employer pays for all your essential utilities and therefore the Commissioner is not convinced that you have established a home outside of Australia. You have not advised Medicare, your health care provider or any financial institutions that you have left Australia for an indefinite period. Further your assets and family are based in Australia. Accordingly, as your Australian domicile will remain unchanged and the Commissioner is not satisfied that you have establish a permanent place of abode outside of Australia, you will continue to be a resident of Australia for income tax purposes in the years that are included in this ruling under the 'domicile test'. | Detailed Reasoning - Conclusion: As it has been established that you will continue to be a resident of Australia for income tax purposes under both the 'resides' test and the 'domicile' test, there is no need to consider the remaining 2 tests. Therefore you will continue to be a resident of Australia for income tax purposes for the income years included in this ruling under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.