Private ruling: Residency for tax purposes
Published: November 2013
Ruling period: Income year ended 30 June 2013 | Income year ending 30 June 2014 | Income year ending 30 June 2015 | Income year ending 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Question and answer: | Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: You are a citizen of Australia. Your country of origin is Country Y. You initially departed Australia for Country X in 2013. Your spouse and children remained in Australia. You indicated that work / employment was the reason for going overseas when completing the Australia Immigration outgoing passenger card. You entered Country X with a two year visa. The purpose of your visit to Country X is employment with a Country X employer. Your current employment is for a period of two to three years. You intend to return to Australia at the end of your employment contract unless your contract is extended. You do not intend to reside overseas permanently. You return to Australia every one to two months. You return to Australia to be with your spouse and children and to fulfil your employment responsibilities. You were employed full time with your Australian employer until 30 June 2013. When you are in Country X, you rent an apartment. You plan to buy a house in Country X in the near future. You own an apartment in Australia that you have previously lived in and which is currently being rented out. When you are in Australia you live with your spouse's family. You intend to ship your household effects from Australia to Country X once you have purchased a house in Country X. You intend for your spouse and children to join you in Country X once you have purchased a house. Neither you, nor your spouse, are Commonwealth government employees. You have not advised the Australian Electoral Office to have your name removed from the electoral roll. You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident. You have not advised Medicare of your health insurance provider to have your name removed from their records.

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. 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 set out in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia . Although no one single factor is decisive and the weight given to each factor depends on individual circumstances, IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. | 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 stated in Joachim v Federal Commissioner of Taxation 2002 ATC 2088 (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. This view was confirmed in the more recent case of Iyengar v FC of T [2011] AATA 856 (Iyengar's case). In your case, you have gone to Country X on a two-year visa for the purposes of employment. You intend to return to Australia at the completion of your employment contract. Furthermore, you have make regular return visits to Australia to visit your family and fulfil your employment obligations in Australia. We consider that the above facts indicate that you will maintain continuity with Australia for the financial years included in this ruling. | 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. In your case, you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence: In your case, you lived and worked in Australia prior to going to Country X. | 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. In your case, you have employment obligations in both Country X and Australia and return to Australia regularly to fulfil your Australian employment obligations and to be with your spouse and children. Although you intend for your spouse and children to join you in Country X in the near future, your employment obligations in Australia will remain, and furthermore, you intend to return to Australia permanently at the completion of your employment obligations in Country X. You indicated on your Australia Immigration outgoing passenger card that work / employment was the reason for going overseas. Furthermore, you have not advised the Australian Electoral Office to have your name removed from the electoral roll, you have not advised any Australian financial institutions with whom you have investments that you are a foreign resident and you have not advised Medicare of your health insurance provider to have your name removed from their records. Based on the above, we do not consider anything about your habits and mode of life during the financial years included in this ruling will be inconsistent with you being a resident of Australia for taxation purposes. | 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 return to Australia for personal and employment purposes every 1 to 2 months. 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 be a resident of Australia for income tax purposes. Considering the above, we do not consider the duration of your return trips to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes in each of the income years included in this ruling. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You have gone to Country X for employment purposes. You return to Australia for personal and employment purposes every 1 to 2 months. | 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 and children currently remain in Australia and you intend for them to join you in Country X in the future. It is significant that in the recent decisions regarding the residency status of persons working overseas, including Iyengar's case, Bezuidenhout v Commissioner of Taxation [2012] AATA 799 and Case 5/2013 [2013] AATA 394 (Case 5/2013), the taxpayers both had family residing permanently in Australia. There is particular emphasis placed in these decisions on the taxpayers' Australian residence being the 'family home'. The Macquarie Dictionary defines 'family' as: · parents and their children, whether dwelling together or not. · one's children collectively. · any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins. Consistent with the findings in Case 5/2013 and Iyengar's case, and the definition of family provided by the Macquarie Dictionary the fact that your spouse and children, as well as your spouse's family, continue to reside in Australia indicates the strength of your family ties to Australia. | Detailed Reasoning - Business or economic ties: You have employment in Country X for two to three years. You also have permanent employment in Australia. | Detailed Reasoning - Assets: You own a house in Australia. You have no significant assets in Country X however you intend to purchase a house in the future. | 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 will maintain your house in Australia for the period you are in Country X however this is currently being rented out. When you are in Australia you stay with your spouse and your spouse's parents. | Summary: As stated above it is important 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 a two-year visa for Country X · you have permanent employment in Australia · you intend to return to Australia at the completion of your employment obligations in Australia · you maintain a house in Australia Based on a consideration of all of the factors outlined above, you are residing in Australia according to ordinary concepts, as you will maintain a continuity of association with Australia for the relevant period. Therefore, you are a resident under the resides test. | 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. | Detailed Reasoning - Domicile: 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 Country Y, however, you are now only a citizen of Australia, therefore, your domicile of choice is Australia. You have not indicated that you have changed or intend to change your domicile to Country X or any other country. Therefore, your domicile remains as Australia while you are in Country X. | 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 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 maintain a house in Australia · you return to Australia regularly · you do not intend leaving Australia on a permanent basis As your domicile is Australia and the Commissioner is not satisfied that you have a permanent place of abode outside of Australia, you are therefore a resident of Australia under the domicile test. | Detailed Reasoning - Your residency status: As you meet the resides test and the domicile test, you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.