Private ruling: Residency
Published: February 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: Yes Year ended 30 June 2013

Relevant facts and circumstances: Your country of origin is Australia and you are an Australian citizen. You were offered employment in Country X on an approximately one year contract. Your employer is Australian with Country X being the host country while you are employed there as per your employment contract. You left Australia with your spouse to work in Country X. You live in furnished accommodation provided by your employer. Your employer will also manage the payment of electricity, gas and water bills as per your employment contract. You have a bank account, credit card, vehicle and motor bike in Country X. You pay tax on your earnings in Country X. It is possible that your employment contact will be extended for a further year but this is unknown at this time. You are unsure at this stage where you will locate to at the completion of the project in Country X. You expect to come back to an Australian city but this has not been confirmed yet. You own a house in Australia which is being rented out while you are in Country X. You and your spouse were previously employed by the Commonwealth government and are still members of the CSS but have not deposited money into the fund since leaving Commonwealth employment.

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

Reasons for decision: Detailed Reasoning - Residency: 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: · 'resides' test (ordinary concepts test) · domicile and permanent place of abode test; · 183 day test; and · Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | 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 Taxation Ruling TR 98/17 residency status of individuals who enter Australia , and Taxation Ruling IT 2650 residency status of individuals who temporarily live outside 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 departed Australia with your spouse to live and work in Country X on an approximately one year employment contract. You expect that you will return to Australia at the completion of your time in Country X. You still have a home in Australia which is being rented out during your time overseas. | 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. Your country of origin is Australia and you are an Australian Citizen. | Detailed Reasoning - (iii) History of residence: You moved to Country X when you were offered an approximately one year employment contract. Prior to moving to Country X you were living in your own home in Australia. | 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 and your spouse moved to Country X for work purposes on an approximately one year employment contract. You and your spouse live in employer provided accommodation and your employer also manages the payment of utilities such as electricity, gas and water. Your house in Australia is being rented out while you are living in Country X. | 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 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 been living in Country X for approximately one year with your spouse and you have not returned to Australia for any period since leaving. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You have not returned to Australia since leaving. | 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 accompanied you to Country X. | Detailed Reasoning - Assets in Australia: · You own a house in Australia which is being rented out. | Detailed Reasoning - Assets overseas: · You have a bank account in Country X · You have a vehicle and motor bike in Country X Your job is located in Country X. | 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 own a house in Australia which is being rented out while you are living and working in Country X. | Detailed Reasoning - Summary - resides test: You have retained a continuity of association with Australia due to the following factors: · Your country of origin is Australia and you are an Australian citizen · You expect to return to Australia when your employment contract ends · You have not moved to Country X permanently, you are there for work purposes only on a contract · You have kept your house in Australia which is being rented out while you are away · Your accommodation in Country X is of a temporary nature and related to your employment, as your employer provides you with accommodation and they manage payment of utilities In consideration of the factors outlined above, you are residing in Australia according to the ordinary meaning of the word 'reside'. Therefore you are a resident of Australia under the resides test. | Detailed Reasoning - Other residency tests: A taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode tests; the 183 day test, and superannuation fund test. | Detailed Reasoning - Domicile and permanent place of abode: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. IT 2650 states that: Persons leaving Australia temporarily would generally be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. | Detailed Reasoning - Application to the your circumstances: Your country of origin is Australia and you are an Australian citizen. You have maintained your Australian domicile as you have not become a permanent resident or citizen of Country X. As you have an Australian domicile you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. | Detailed Reasoning - Consideration of these factors: · Your initial intention was to travel to Country X to undertake an approximately one year employment contract. · You have a house in Australia and this is being rented out while you are working in Country X . · Your employer provides you with fully furnished accommodation in Country X and they pay the utilities services (electricity, gas, water). · You have only been in Country X for approximately one year. · You are unsure how much longer you will be in Country X or whether your employment contract will be extended. Based on the factors above, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. You are predominantly in Country X for work purposes only and live in employer provided accommodation. They have furnished the accommodation and manage the payment of utilities services. Furthermore your initial intention was to be in Country X for one year as per your employment contract and you intend to return to Australia at the completion of your employment contract. | Detailed Reasoning - Conclusion - your residency status: As you have passed the resides and domicile tests, we have determined that you are a resident of Australia for tax purposes. It is therefore not necessary to cover the remaining tests.