Private ruling: Residency status
Published: March 2014
Ruling period: 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 2013

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: Yes.

Relevant facts and circumstances: You were born in Australia and you are a citizen of Australia. Your spouse was born in Country Z and is a permanent resident of Australia. You have gone to Country Y for work purposes. You have a resident permit to stay in Country Y for the duration of your employment contract. This resident permit is applied for and obtained for you by your employer. If your employment ceases for any reason you are required to leave Country Y as their domestic law does not allow you to stay in the country if you are not employed. Previously you were exempt from tax in Australia on your income derived in Country Y under section 23AF of the Income Tax Assessment Act 1936 . You have been working in Country Y for a number of years. Your employer provides your accommodation in Country Y. Prior to leaving for Country Y you lived with your spouse in your family home in Australia. You have sold the family home in Australia and have no assets in Australia. As part of your work contract in Country Y your spouse and children relocated to Country Z to live so they could be closer to you to visit on your time off. You have purchased a home in Country Z. You work x weeks on and c weeks off. You visit your family in Country Z during your time off work. You are not required to have a visa to enter Country Z however you can only stay for a short period at any one time and then you are required to leave. You intend on applying for a marital visa at some stage in the future to enter Country Z. You intend on returning to Australia to live within a couple of years of your work ending in Country Y. You have not returned to Australia in the ruling period. You do not intend to return to Australia in the ruling period. Your parents and other family members live in Australia. You have notified the Electoral Commission to have your name removed from the roll. You have requested that your repatriation destination be Australia under the terms of your work contract. You and your spouse have not been Commonwealth Government employees. You are over 16 years of age.

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

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' and 'permanent place of abode' test; · the 183 day test; and · the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd 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'. In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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 with Australia compared to the foreign country concerned; and (viii) maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): 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. In your case you have gone to Country Y for work purposes. You intend on returning to Australia to live within a couple of years of your work ending in Country Y. Although you will not be physically present here while you are working in Country Y, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above. | Detailed Reasoning - (ii) Nationality: You were born in Australia and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence and movements: You lived and worked in Australia prior to taking up the work contract in Country Y. | Detailed Reasoning - (iv) Habits and 'mode of life': You intend to live and work in Country Y for the duration of your employment. You live in employer provided accommodation in Country Y. You are on an employer sponsored visa for the duration of your employment. This visa only permits you to be in Country Y while you are working and have a contract to work. You have listed Australia as your repatriation destination under your work contract. Your spouse and children have gone to Country Z to live while you are in Country Y. You work x weeks on and c weeks off and spend this time off in Country Z with your family. You can only be in Country Z for a short time as you do not have a visa for country Z. It is considered that you still have a continuing association with Australia and is consistent with someone who is still residing in Australia. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You have not returned to Australia in the ruling period. You do not intend to return to Australia in the ruling period. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: The purpose of your absence from Australia is to work in Country Y, subject to future visa approvals and extensions. | Detailed Reasoning - (vii) Family, business and financial ties: Family Your spouse and children are living in Country Z while you are working in Country Y. Business or economic As mentioned above, you have taken up an employment contract in country Y. Assets You have no significant assets in Australia. You do not have any assets in Country Y. You have a house in Country Z. | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: You are not maintaining a home in Australia for the period you are working in country Y. | Detailed Reasoning - Summary of the resides test: As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning. In your case, although you intend to be physically absent from Australia, there are various factors that indicate that you have not ceased to be a resident of Australia. These are primarily: · you have a restrictive visa whereby your ability to live in Country Y is dependent on your continuing employment; · you are an Australian citizen; · you have listed your repatriation destination as being Australia under the terms of your work contract in Country Y; and · you intend to return to Australia within a couple of years of work finishing Based on the above, you will retain a continuity of association with Australia while you are overseas and will be residing in Australia according to the ordinary meaning of the word. Therefore, you are a resident of Australia under the 'resides' test of residency. 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 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'. A person may also adopt a domicile of choice. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country by applying for permanent residency or citizenship. Your domicile of origin is Australia. You have not indicated that you have changed or are going to change your domicile. Your resident permit and visa do not allow you to remain in Country Y beyond your work contract. 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 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. The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia for the following reasons: · You have an employer sponsored visa and resident permit which only allows you to be in Country Y for the duration of your employment. · You have listed Australia as your repatriation destination on your work contract. · You intend on returning to Australia within a couple of years of your work contract ending in Country Y. · You live in employer provided accommodation in Country Y. · Although you have purchased a home in Country Z, due to Country Z immigration restrictions, you currently are only able to stay for a short period in Country Z each time you visit. As your accommodation and your overall presence in Country Y is entirely contingent on your ongoing employment, it is considered that your place of abode is temporary in nature and could not be considered to be a permanent place of abode. Further, as your presence in Country Z is limited to a short time per visit, you have not established a permanent place of abode there either, despite owning a house in Country Z. You are a resident under this test. As you meet the resides and domicile tests of residency, you are a resident of Australia for tax purposes for the income tax years.