Private ruling: Residency for taxation purposes
Published: February 2015
Ruling period: 1 July 2014 to 30 June 2016.
Date scheme commenced: 1 July 2014.

Ruling: Question and answer: | Will you be an Australian resident for taxation purposes between date A and Date B? | Yes.

Relevant facts and circumstances: You were born in Australia. You are an Australian citizen. You are not a citizen of any other country. You are employed in Australia. You are normally a resident of Australia for taxation purposes. On Date A you left Australia with your family and travelled overseas to work temporarily. You will return to Australia and will be away less than two years. You will remain employed by your Australian employer and under the terms of your appointment will be repatriated back to Australia at the end of the assignment. You have rented out your home in Australia.

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'. Because 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. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, the Commissioner accepts that you will not be residing in Australia according to the ordinary meaning of the word 'reside' between Date A and Date B. Therefore you will not be a resident of Australia for taxation purposes under this test during that period. | Detailed Reasoning - The domicile test: Under the domicile test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin' and will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice: but to do so, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia specifies that a person with an Australian domicile who is living outside Australia will retain their Australian domicile if they intend to return to Australia on a 'clearly foreseen and reasonably anticipated contingency' - at the end of a specific period for example. Because you were born in Australia your domicile of origin is Australia. You have stated your intention is to return to Australia. Accordingly, you will retain your Australian domicile during the period you live and work overseas. Because you will retain your Australian domicile while you are overseas, you will remain a resident of Australia for taxation purposes under this test unless the Commissioner is satisfied you have established a permanent place of abode outside Australia. The word 'permanent' in the context of this test of residency is not taken to mean everlasting or forever, but rather, is used in the sense of being contrasted with temporary or transitory. Taxation Ruling IT 2650 notes that generally speaking, an overseas stay for a period of less than two years is considered transitory and that a taxpayer who returns to Australia after a transitory stay overseas is likely to retain their Australian residency for taxation purposes during their absence from Australia. However, IT 2650 also notes that: • the length of a taxpayer's stay overseas is not conclusive in determining whether or not a permanent place of abode was established by the taxpayer in the overseas location, and • the fact that a taxpayer knows they will return to Australia at a definite point in time does not mean that they cannot establish a permanent place of abode outside Australia. To properly determine whether or not a taxpayer has (or will) establish a permanent place of abode overseas during their absence from Australia requires consideration of a number of factors that have been identified by the Courts and Boards of Review/Administrative Appeals Tribunal as being relevant in reaching a state of satisfaction as to a taxpayer's permanent place of abode. These factors are identified in IT 2650 as: (a) The intended and actual length of the taxpayer's stay in the overseas country. (b) 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. (c) 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. (d) Whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence. (e) The duration and continuity of the taxpayer's presence in the overseas country. (f) The durability of association that the person has with a particular place. Having considered the facts of your case, and noting that IT 2650 specifies that while no single factor is decisive, greater weight should be given to factors (c), (e) and (f) than to the other factors identified above, the Commissioner is not satisfied that you will establish a permanent place of abode outside of Australia during your temporary assignment to the overseas country. In particular we note that: 1. Although you have no doubt established a place to live overseas, you will be away for less than two years which is the minimum period specified in IT 2650 as the period required for an overseas stay to be considered more that transitory in nature. 2. We consider your durability of association to be greater with Australia than it is with the overseas country you are working in because: a. You have stated your intention to return to Australia. b. Although you have rented out your Australian home it cannot be said you have abandoned it because it has not been sold. c. You will remain employed by your Australian employer during the temporary assignment and under the terms of your appointment will be repatriated back to Australia at the end of the assignment. Considering the above, you will be a resident of Australia for taxation purposes under this test for the duration of your temporary assignment in the overseas country. As it has been determined you will be a resident for taxation purposes under this test, there is no need to consider the remaining tests of residency in your case. | Detailed Reasoning - Conclusion - your residency status for taxation purposes: You will remain a resident of Australia for taxation purposes for the duration of your temporary assignment in the overseas country.