Private ruling: Residency
Date of advice: 21 September 2017
Published: February 2018
Date scheme commenced: 1 July 2015

Ruling: Questions and answers | 1. Are you a resident of Australia for taxation purposes? | Yes. | 2. Is the income you will derive from your employment in a foreign country assessable in Australia? | Yes. | The ruling applies for the following period | Year ending 30 June 2016 | The scheme commenced on | 1 July 2015

Relevant facts and circumstances: General You were you born overseas. You been granted permanent residency in Australia. You departed Australia. You are employed by a company which is based in a foreign country. You commenced working for the company and are still employed by them. You are satisfied with your job. Your intention, once all your commitments are done, you and your spouse are planning to settle in a foreign country. You hold a visa which allows you to live and work in a foreign country. The visa will expire in a few years and it can be renewed if you are still employed by the company. Your visa was supported by your employer. You are not an Australian citizen therefore not on the electoral roll. You did not advise Medicare of your departure. You have visited Australia several times during the income year. On these visits, you spend at least several days in in your Australian home. You did not advise your private health insurance provider to have your policy suspended or cancelled. Your private health coverage is a family policy. Your spouse receives coverage through their employer. Your spouse remained in Australia and so required the policy to remain in place. You lodged an Australian income tax return for a prior income year. You stated you were an Australian resident as you were within Australia during part of that income year. When visiting Australia, you indicate on the Immigration Card that you are an overseas resident visiting family. Accommodation Your employer provided you with accommodation at a hotel. You then rented an apartment. You live in a fully furnished apartment in a foreign country. You are the sole tenant. The lease is for one year and can be renewed anytime once it has expired. As a tenant, you are entitled to use the facilities in the building including access to the clubhouse, the use of gym, pool and other amenities available to the occupants. You use the pool and gym several times a week. Assets You and your spouse own a house in Australia. You and your spouse maintain joint bank accounts in Australia. Apart from your home and bank accounts, the only asset you maintain in Australia is a car, which is registered in your name. It was used by your spouse as you only have one motor vehicle. You have not obtained a car or driver’s license in a foreign country, due to an excellent public transport system and the expense of owning a car. You maintain a savings bank account and a credit card in a foreign country. The savings account is used to receive your salary. You have made no investments in Australia while you were overseas. Prior to your departure, some personal effects were taken to a foreign country. Others were left in Australia. You received income from Australian sources: bank account interest from a joint account with your spouse. Your Australian superannuation account received interest. You have not advised any Australian financial institution that you were a foreign resident so that non-resident withholding tax can be deducted. You have acquired assets in a foreign country: ● A bank account. ● A superannuation account. ● You have acquired household effects in a foreign country. ● You have lodged foreign tax returns while living overseas. Family and Social Connections Your spouse remains in Australia. The initial plan was that your spouse would be joining you in a foreign country. However, due to a relative’s health issues, which need personal care and attention, you and your spouse have decided that they will stay in Australia and look after the relative. You have no dependants. You maintained an overseas membership of an Australian association; to keep abreast of developments within Australia. You are still a member of club in Australia. You have not joined a club in a foreign country because of the expense involved.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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. 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 test ● the 183 day test ● the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (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. 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 meet the conditions of one of the other three tests. | Detailed Reasoning - The resides (ordinary concepts) test: The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the ‘resides’ test: (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. These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia . It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia, specifically: ● You have been granted permanent residency in Australia. ● You departed Australia to live and work in a foreign country, where you are employed by a foreign company. ● In a foreign country you live by yourself in rented accommodation. ● You hold a visa which allows you to live and work in a foreign country and which can be renewed if you are still employed. ● You have visited Australia several times during the 2015/16 income year. On these visits, you spend at least X days in Australia. ● You and your spouse own a house in Australia where you spouse continues to live while you are overseas. ● You and your spouse maintain joint bank accounts in Australia. ● You have an Australian superannuation account. ● You own a car in Australia. ● You have not advised any Australian financial institution that you were a foreign resident so that non-resident withholding tax can be deducted. ● You maintained membership of an Australian association. ● You are still a member of an Australian club. 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. 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 and permanent place of abode 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: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case, you were born overseas and moved to Australia but have not become a citizen of Australia. However, you have been granted permanent residency in Australia. Therefore, your domicile of origin was overseas and you changed your domicile to Australia. Your domicile will still be Australia while you are working in a foreign country as you have not indicated that you will be taking any legal steps to change your domicile to that country. | Detailed Reasoning - 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. In your case: ● You and your spouse own a house in Australia where you spouse continues to live while you are overseas and to which you can return. ● You live in rented accommodation in a foreign country on a one year lease. ● You hold a visa which allows you to live and work in a foreign country and which can be renewed if you are still employed in the foreign country. You have not established a permanent place of abode in a foreign country as your presence there is temporary in nature. Your visa allows you to remain there as long as you are employed by the company. You cannot establish a permanent place of abode when your presence in a place is temporary. Also, you live in rented accommodation in a foreign country there but retain ownership with your spouse of a home in Australian where your spouse remains and to which you can return at any time. The Commissioner is not satisfied you have a permanent place of abode outside of Australia. Therefore, you are a resident of Australia under the ‘domicile and permanent place of abode’ test of residency. | Detailed Reasoning - Your residency status: As you are a resident of Australia under two of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are an Australian resident for taxation purposes. | Detailed Reasoning - Assessable income: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that, for and Australian resident, your assessable income includes income from ordinary concepts derived from all sources whether in or out of Australia. The income you received from a foreign country is ordinary income and so is assessable under section 6-5 of the ITAA 1997.