Private ruling: Residency
Published: January 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: Question and answer | 1. Are you a resident of Australia for taxation purposes? | Yes. | 2. Is your income earned overseas assessable in Australia? | Yes.

Relevant facts and circumstances: You were born in country Y and you are a citizen of Australia. You went to country Z for work purposes. You have a work sponsored employment visa and resident permit for country Z. You have an employment contract in country Z. Your work contract is for a few years. You are not able to stay in country Z on your current visa when your current employment ceases. To be eligible to remain in country Z beyond your current work contract you are required to apply for one of the following visas: · tourist visa · Student resident visa · Investor resident visa · Employment visa · Employment contracting visa All of the above visas do not allow a foreigner the right to stay in country Z on a permanent basis. All visas have restrictions around sponsors and duration of stay in country Z. Your employer supplies your accommodation along with a car as part of your work contract. Your employer pays for your children's schooling. Your family will join you in country Z. Your employer provides you with air tickets for you and your family back to your point of departure each year. You will rent out your family home while you are in country Z. You have three other rental properties which you will continue to rent out while you are in country Z. You and your family intend on returning to Australia for Christmas to visit family and friends. You resigned from your job in Australia to take up the position in country Z.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5

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. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35): Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms. 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. Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62): Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1. In your case, you have gone to country Z for work purposes and your employer pays for air tickets back to Australia for annual holidays. Although you will not be physically present here while you are working in country Z, 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 country Y and are an Australian citizen. | Detailed Reasoning - (iii) History of residence and movements: You were born in country Y. You lived and worked in Australia prior to taking up the work contract in country Z. | Detailed Reasoning - (iv) Habits and 'mode of life': You intend to live and work in country Z for at least two years. You are living in employer provided accommodation in country Z. Your employer provides you with a car and pays for your children's schooling. You are on an employer sponsored visa for the duration of your work contract. This visa only permits you to be in country Z while you are working and have a contract to work. 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 stated that you intend on returning to Australia for Christmas. Your work contract provides for air tickets for you and your family each year for annual holidays. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: The purpose of your absence from Australia is to work in country Z, for at least two years, subject to future visa approvals and extensions. | Detailed Reasoning - Family: Your spouse and children will join you in country Z. You have some family that will remain in Australia and you intend on visiting them when you make return trips back to Australia. | Detailed Reasoning - Business or economic: As mentioned above, you have taken up an employment contract in country Z for a period of at least two years. | Detailed Reasoning - Assets: Your assets in Australia include several rental properties. Your assets in country Z consist of personal items. It is evident that you have a higher value of assets in Australia than country Z. | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: You are renting your family home out for the duration of your work in country Z. | 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 for at least two years, 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 Z is dependent on your continuing employment; · you are an Australia citizen who will be repatriated to Australia by your employer should your employment cease; · you have stronger financial ties through your assets to Australia than with country Z; and · you have not disposed of your family home and are renting it out while you are in country Z. 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. | 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 to prove an intention to make his or her home indefinitely in that country (eg; citizenship). Your domicile of origin is country Y and your domicile of choice is Australia. You have not indicated that you have changed or are going to change your domicile. You are not able to become a permanent resident of country Z as your resident permit and visa do not allow you to remain in country Z beyond your work contract. Your domicile is therefore 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. The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia for the following reasons: · you have not disposed of your family home and are renting it out while you are in country Z; · you have an employer sponsored visa and resident permit which only allows you to be in country Z for the duration of your work contract; and · your employer supplies your accommodation The nature of your accommodation is not permanent in country Z as it is supplied by your employer and your presence at this accommodation and in Oman are contingent on your employment. If you leave your employment or your employment is terminated you are not able to remain living in country Z. You are a resident under this test. | Detailed Reasoning - Your residency status: As you meet the resides and domicile tests of residency, you are a resident of Australia for tax purposes for the income tax years ending 30 June 2014, 30 June 2015, 30 June 2016 and 30 June 2017. | Detailed Reasoning - Overseas Income: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. In your case, as you are a resident for tax purposes, your assessable income will include income from all sources (including overseas).