Private ruling: Residency
Published: May 2014
Ruling period: 1 July 2012 to 30 June 2016.
Date scheme commenced: 1 July 2012.

Ruling: Question and Answer | Will you be a resident of Australia for taxation purposes from when you left Australia? | Yes.

Relevant facts and circumstances: You were born in Australia and you are an Australian citizen. You left Australia and moved to another country with your spouse and children (your family). You moved to the other country because your spouse gained employment in that country. You do not have any employment in the other country and you do not intend to engage in any paid work outside of Australia. You live in a rental property in the other country with your family. You intend to live in the other country for the foreseeable future and you cannot state with any certainty when or if you will return to Australia. Your children are attending school in the other country. Prior to leaving Australia you were employed full-time with an Australian employer. You have maintained employment with your Australian employer. You regularly return to Australia to work for your Australian employer. Prior to leaving Australia you were residing with your family in a home (your Australian home). You have rented your Australian home out. When you return to Australia you reside with relatives. When you moved overseas half of the furniture from your Australian home was placed in a commercial storage facility in Australia. Apart from your Australian home, your assets in Australia include bank accounts and a personal superannuation account. You also have a joint home loan and another joint account with your spouse. You have remained on the Australian Electoral Roll. You and your family have retained your Australian private health insurance.

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

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation 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 Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'. In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 (Miller's case) 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 (Case 5/2013 (2013) AATA 394, paragraph 49): (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 Australia and the other country, and (viii) maintenance of a place of abode. To determine whether or not you will be considered to be residing in Australia for taxation purposes under the resides test during the period in question, it is necessary for us to examine each of these factors in the context of your circumstances. No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances. | 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). Although you have been physically absent from Australia for some time, we consider that you have maintained a level of continuity of association with Australia that is consistent with you being a resident of Australia for taxation purposes. Furthermore, although you have stated you intend to live in the other country for the foreseeable future and cannot state with any certainty when or if you will return to Australia, we consider that you have an intention to return and that you have also maintained an attitude that Australia remains your home . To support these conclusions, we note that: • When you departed Australia your Australian home was rented out as opposed to having been sold. The fact that you retained ownership of your home after leaving Australia supports the conclusion that you have an intention to return to Australia at some stage and that you consider Australia to be your home. Your continued ownership of your Australian home also adds weight to the conclusion that you have maintained a level of continuity of association with Australia that is consistent with you being a resident for taxation purposes. • The fact that you frequently return to Australia to work for your Australian employer also supports the conclusion that you have maintained a level of continuity of association with Australia that is consistent with a you being a resident of Australia for taxation purposes.. • Half of the furniture that was in your Australian home when you left Australia is still in storage in Australia, as opposed to having been disposed of or taken to the other country with you. We consider this to be indicative of an intention to return and an attitude that Australia remains your home. • The fact that you have remained on the Electoral Roll indicates you wish to be able to vote in Australian elections and is supportive of the conclusions that you have retained a degree of continuity with Australia that would be consistent with you being regarded a resident for taxation purposes, as well as an intention to return, and an attitude that Australia remains your home. • The fact that you have chosen to maintain your Australian private health insurance is also supportive of the conclusions that you have retained a degree of continuity with Australia that would be consistent with you being regarded a resident for taxation purposes, as well as an intention to return, and an attitude that Australia remains your home. • We consider the facts that you have retained various Australian assets including bank accounts and a superannuation account and have retained your Australian home loan to also be supportive of the conclusions that you have retained a degree of continuity with Australia that is consistent with you being regarded a resident for taxation purposes, as well as an intention to return, and an attitude that Australia remains your home. | Detailed Reasoning - 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 a factor that is considered along with all of the circumstances of each case. You are an Australian citizen living in another country. We do not consider this situation adds any weight one way or the other to any conclusion about your residency status for taxation purposes. | Detailed Reasoning - History of residence and movements: In Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (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. Since leaving Australia to live in the other country with your family you have returned on several occasions to work with your Australian employer and have stated your intention to continue to do this on a regular basis while you are overseas. We consider this arrangement adds weight to a conclusion that, were it not for your move to the other country to be with your family, you would ordinarily be resident in Australia. | Detailed Reasoning - Habits and 'mode of life': In Iyengar's case the Tribunal noted that examining the habits of life of individuals can be useful to determine whether there has been any change or break in their mode of life which would lead to the conclusion they had ceased to reside in a particular place. You have moved to the other country to live with your family and it is apparent you have done this because your spouse secured employment in the other country. Your children are attending school in the other country and you have rented accommodation in the other country where you are residing with your family. It can be said that these facts all point to a 'mode of life' that is consistent with you having ceased to reside in Australia. On the other hand, you have retained Australian employment which you undertake on a regular basis. You have also retained various Australia assets, including the family home and bank accounts. You have remained on the Electoral Roll and you have retained your Australian private health insurance. All these facts suggest that your 'mode of life' has not changed to the extent that it could be said you had ceased to reside in Australia. On balance, we do not consider this factor places any weight one way or the other on any conclusion regarding your residency status for taxation purposes. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that the mere fact that visits to a country are of short duration does not of itself exclude residence in that country. 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 exclude an individual from being a resident in the country visited. Since leaving Australia to live in the other country with your family you have returned on several occasions to work with your Australian employer and have stated your intention to continue to do this on a frequent basis. We consider the frequency, regularity and duration of these visits to Australia all combine to place significant weight on the conclusion that you have remained a resident of Australia for taxation purposes since you left Australia. | Detailed Reasoning - Purpose of visits to and absence from Australia: Although you have said you cannot state when or if you will return to Australia, nothing in your facts supports any conclusion that you have an intention of residing outside of Australia permanently. Rather, it is apparent from the facts you have provided that the purpose of your absence from Australia is simply to be where your spouse and children are living because of your spouse's employment. In support of this conclusion you have stated you have no intention of obtaining paid work in the other country and you have and will continue to return to Australia on a frequent basis to work for your Australian employer. We consider the fact that you are returning to Australia to earn an income on a regular basis supports the conclusion that you have remained a resident of Australia for taxation purposes since leaving Australia and will continue to remain a resident for taxation purposes. | Detailed Reasoning - Family, business and professional ties to Australia and to the country you are working in: You are living in the other country with your family but on it's own, that fact is insufficient to support any conclusion you have ceased to reside in Australia for taxation purposes. What carries more weight in determining whether or not you have remained a resident for taxation purposes is the fact that you have maintained professional ties to Australia by maintaining employment in Australia which you undertake by returning to Australia on a regular basis. | Detailed Reasoning - Maintenance of a place of abode: When considering this factor in Iyengar's case, the tribunal noted 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. When you left Australia to live in the other country with your family you rented out your Australian home, rather than choosing to dispose of it. We consider this supports a conclusion that you have maintained a place of abode in Australia since leaving in month/year. | Detailed Reasoning - Application of the resides test to your circumstances: As stated previously, the ordinary meaning of the word 'reside' should be attributed the widest possible meaning when considering the application of the resides test in determining a person's residency status for taxation purposes. On balance, and considering all of the above, we consider you have remained a resident of Australia for taxation purposes under the 'resides' test from the time you left Australia and, unless there is a change in your circumstances as described in the facts of this case, you will remain a resident under the resides test until 30 June 2016. Because we have determined your are a resident under the resides test, the remaining three tests do not need to be considered in your case. | Detailed Reasoning - Conclusion: Unless there is a change in your circumstances as described in the facts of this case, you will be a resident of Australia for taxation purposes from when you left Australia.