Private ruling: Residency
Published: October 2013
Ruling period: Year ended 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 2012

Ruling: Questions and answers: | 1. Are you a resident of Australia for taxation purposes for the period N to M? | Yes. | 2. Are you a resident of Australia for taxation purposes from M? | No.

Relevant facts and circumstances: You are a citizen of both Australia and Country X. You went to Country X a number of years ago and your family remained in Australia. At no time during the last several years have you been in Australia for more than 183 days. Your visits to Australia have been annual trips for no more than two weeks at a time. You had a X year work visa for Country X which has been extended for a further two years. Your employer supplied your accommodation while working in Country X. You have just signed a contract to work in Country Y for the same company for X years. You have been granted a resident permit for Country Y. You are responsible for your own accommodation in Country Y and are leasing a property in Country Y. On N your spouse decide to live with you in Country X Your spouse left Australia on M to stay with you in Country X until you commence your work in Country Y and will then accompany you to Country Y. You and your spouse have no intention on returning to Australia to reside permanently. You and your spouse will live in Country X at the end of your Country Y posting. You will retain your house in Australia for your children to live in. You will maintain a bank account in Australia for the purposes of this property. You will maintain your memberships in Australia with various clubs as a non-resident. You have been removed from the Australian electoral roll. You still hold a Medicare card as your children remain on the card. You will keep your Australian drivers licence. You have shares and accounts in Australia. Your current employer pays superannuation contributions into your Australian superannuation fund. You have a drivers licence for Country X and you will obtain one in Country Y. Neither you nor your spouse are currently or have ever been Commonwealth government employees.

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: 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. | Detailed Reasoning - Period 1: In the recent case of Iyengar v FCT [2011] ATC 10-222, the AAT 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, you have ties to both Australia and Country X. Although you have ties to Country X, for the relevant period your ties to Australia were stronger because your spouse and children were residing in Australia. This indicates that you were residing in Australia according to the ordinary meaning of the word resides. | Detailed Reasoning - Period from 2: 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. | Detailed Reasoning - (i) Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this the AAT has stated that: 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. You have worked in Country X for a number of years. You returned to visit your family in Australia for two weeks each year and you did not exceed 183 days in a year here since leaving for Country X. You will commence a two year work contract in Country Y and you do not intend on returning to Australia on a permanent basis. | Detailed Reasoning - (ii) Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. You are a citizen of both Australia and Country X. | Detailed Reasoning - (iii) History of residence and movements: You have worked in Country X for a number of years. You will work in Country Y for the next X years and will then move back to Country X to live on a permanent basis with your spouse. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. You have worked in Country X for a number of years. You will take up a work contract in Country Y for a number of years and you will not be returning to Australia to live on a permanent basis. When you complete your work in Country Y you will go to Country X to live on a permanent basis. Your spouse joined you in Country X and will go to Country Y to live with you. Your spouse will live with you in Country X at the completion of your work in Country Y. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who 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 to be residing in Australia. You have returned to Australia for short periods since commencing work in Country X. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: The purpose of your absence from Australia is for work and you do not intend on returning to Australia on a permanent basis. You will go to Country X at the end of your work in Country Y to live permanently. | Detailed Reasoning - (vii) Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: Your spouse has gone to Country X to live with you and will go to Country Y for the duration of your contract and then to Country X where you intend to live. Your children will remain in Australia. | Detailed Reasoning - Business or economic ties: You work in Country X and have done so for a number of years. You are about to commence a contract with the same company in Country Y. | Detailed Reasoning - Assets: You have a house and shares along with a joint account in Australia. You do not have any assets in Country X or Country Y. | Detailed Reasoning - (viii) Maintenance of Place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You have a house in Australia which your children will live in. You have a bank account to maintain the expenses associated with this house. Based on a consideration of all of the factors outlined above, you are a non-resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the relevant period. | 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. Your domicile of origin is Australia. You have citizenship of Country X and therefore your domicile of choice is Country X. You are not a resident under this test. | Detailed Reasoning - The 183-day test: When a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You are not a resident under this test as you do not intend on being in Australia for 183 days or more in a financial year. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Only Commonwealth Government employees are eligible to contribute to the CSS and PSS. As you and your spouse were not a Commonwealth Government of Australia employee and you are over the age of 16 you will not be treated as a resident under this test. | Detailed Reasoning - Residency status: You were a resident of Australia for taxation purposes for the period xxx. You are not a resident of Australia for taxation purposes for the period xxx.