Private ruling: Are you an Australian resident for tax purposes
Published: September 2013
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

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

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You were born in and are a citizen of Australia. You have not been granted permanent residency of any other country. You have not lodged tax returns in any other country. Your country of origin is Australia. You do not have a spouse or children. You own a property in Australia which is being rented; you are receiving rental income from this property. You commenced working in country X in 20XX. You are paid into an Australian bank account. You intend to work in country X for Y years. You have a work visa for country X. Your work visa does not allow you to stay permanently in country X. You have a contract with your employer in country X. Your contract with your employer specifies the following conditions: · Condition 1 The contract is based on a rotation schedule, fly in/ fly out basis with return flights to Australia. · Condition 2 Your employer will provide and meet all travel, accommodation and vehicle costs. · Condition 4 Invoice hours for travel time will be limited for each of the fly in or fly out travel times. · Condition 6 Your contract is subject to maintaining a valid Work Permit and Visa as required by the country X government departments. It is also subject to maintaining a satisfactory level of performance. · Condition 7 A fully maintained vehicle will be provided by the Contractor on commencement of employment in country X. You are a member of a social club in country X. All of your household effects are in country X. You intend to spend your week off work in country Y in rented accommodation. You have a tourist visa to visit country Y. Your tourist visa does not allow you to remain permanently in country Y. You will be staying in a hotel when you visit country Y. You do not have any assets in country Y. You do not have any social or sporting connections with country Y. You do not intend to return to Australia unless required to do so. You have returned to Australia a number of times since you departed in 20XX: You do not have a position of job being held for you in Australia. You do not have any social or sporting connections to Australia. You have not been a Commonwealth government of Australia employee. You have advised the Australian Electoral Office to have your name removed from the electoral roll. You have advised Medicare or your health insurance provider to have your name removed from their records. When completing the Australian Immigration Outgoing passenger card you state that you are a resident departing permanently.

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

Reasons for decision: Summary: 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. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 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, and · the superannuation test. 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 considered to be a resident of Australia for tax 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 (2003) AATA 394, paragraph 49): · physical presence in Australia; · nationality; · history of residence and movements; · habits and "mode of life"; · frequency, regularity and duration of visits to Australia; · purpose of visits to or absences from Australia; · family and business ties to Australia and the other country; and · maintenance of a place of abode. To determine whether or not you were residing in Australia for taxation purposes during the years 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). In recent court cases taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia. In Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222 (Iyengar's case), it was indicated that there is a requirement that a taxpayer at least be physically present in Australia for part of an income year. Further in this case it was considered that the taxpayer remained a resident of Australia for income tax purposes even though during the period he was working overseas (2 years and 7 months) he had only returned to Australia for a two week period and for a 10 day period. During the financial years covered by this ruling you have returned to Australia a number of times. In addition, under condition 1 of your employment contract with your employer your contract is based on a rotation schedule, fly in / fly out basis with return flights to Australia. These flights are financially supported by your employer. This is indicative of an employment provision that is supportive in enabling an employee to maintain a continuity of association with Australia. These facts indicate that you maintained continuity with Australia. | 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 and you have not indicated that you will seek citizenship of any other country. | Detailed Reasoning - History of residence and movements: In 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. You were born in Australia. In 20XX you commenced working in country X and you intend to travel to country Y during your holidays and return to country X when your work resumes. It can be said therefore that had it not been for your work in country X and your desire to spend your holidays in country Y that you would ordinarily continue to reside in Australia. In light of the above, and consistent with the principles established in Iyengar's case, your history of residence and movements will not be consistent with someone who is no longer residing in Australia. | Detailed Reasoning - Habits and "mode of life": In Sneddon v FC of T [2012] ATC 10-264 ( Sneddon's case ) the taxpayer was provided with a fully-furnished apartment leased by his employer. Similarly in Case 5/2013 , the taxpayer resided in a serviced apartment in Singapore and fully-furnished quarters provided by his employer in India. In both cases the taxpayers were found to be residents of Australia. In your case, included in your employment contract are certain conditions including that your employer will supply you with accommodation during your period of employment. While it is your intention to reside in country X for Y years and to spend your week off work in country Y, you will not be a resident of either of these countries. You will be in country X on a working visa and your stay in country X is exclusively contingent on your ongoing employment and does not allow for you to remain permanently. When you visit country Y you do this on a tourist visa, this visa does not allow you to remain permanently. 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 - Frequency, regularity and duration of visits to Australia: In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that mere fact that visits to a country are of short duration does not of itself exclude residence in that country. You intend to return to Australia only if required. You have returned to Australia on a number of occasions that vary in length. 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 a resident of Australia for income tax purposes. As outlined above the return flights to Australia that are included as part of your contract with your employer are indicative that your employer is active in supporting your return to Australia to enable you to maintain your ties. Considering the above, we do not consider the relatively short duration of your actual and intended 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 - Purpose of visits to or absences from Australia: The details of your intended return trips to Australia during the financial years included in this ruling are discussed above. As stated, the brevity of those trips does not preclude you from being a resident of Australia for taxation purposes. There is a clear indication that you intend to continue to maintain a continuity of association with Australia. As previously stated, your intention to maintain a continuity of association with Australia is supported by your employer through the provision in your employment contract of return flights to Australia. With regard to the purpose of your absence from Australia, your circumstances indicate that your absence from Australia is for the purpose of filling your contractual obligations with your employer. This indicates that your continued presence in country X is contingent upon your continued employment with this company. The purposes of your visits to Australia and absences from Australia are not sufficient to preclude you from being considered a resident of Australia for taxation purposes. | Detailed Reasoning - Family and business ties to Australia and the overseas country or countries: Family It is significant that in recent decisions regarding the residency status of persons working overseas, including Iyengar's case, the taxpayer had family residing permanently in Australia. There is particular emphasis placed on this decision 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 Iyengar's case, and the definition of family provided by the Macquarie Dictionary, the fact that your extended family will continue to permanently reside in Australia indicates the strength of your family ties to Australia as opposed to your family ties in country X or any other country. Clearly your family ties are far stronger in Australia than they are in country X or any other country. Business or economic You are employed in country X, where you derive income, however, from the information that you have provided this is the only business or economic tie that you will have with country X or any other country. You own an investment property in Australia, you are paid into an Australian bank account and you maintain other Australian bank accounts. Your business or economic ties are stronger in Australia than they are in country X or another other country. Assets Your assets in Australia consist of an investment property and bank accounts, while in country X your only assets are your household affects. You did not own any property of substance in country X or any other country; furthermore you stay in accommodation in country X that is supplied by your employer. Your case is simular to the taxpayer in Iyengar's case where the taxpayer was found to be a resident of Australia for tax purposes. In that case the taxpayer did not purchase substantial property whilst overseas, but retained assets in Australia. The fact that you did not own assets of substance in country X or any other country, while continuing to maintain your assets in Australia, is not consistent with a person who is intending to reside in another country indefinitely. This view is consistent with the findings in the Iyengar's case , where the taxpayer was found to be a resident of Australia for income tax purposes. Maintenance of place of abode In country X you stayed in accommodation that was supplied by your employer; therefore, as you lived in this style of accommodation it cannot be said that you were maintaining a place abode outside of Australia. However, you do own an investment property which you continued to maintain. | Detailed Reasoning - Conclusion: You lived, and continue to live, in accommodation that is supplied by your employer and are therefore not maintaining a place of abode outside of Australia, however, it should be noted that you own an investment property in Australia. However with regards to the remaining factors, your circumstances are markedly similar to Sneddon's case, Iyengar's case and Case 5/2013, all of whom were found to be residents of Australia for income tax purposes. Significantly, the emphasis given in these cases to the place where the taxpayer's 'family' resides, physical presence in Australia, family and business ties to Australia and habits and mode of life. Consistent with the findings in these cases, the actions and patterns that you exhibit are not consistent with someone who has left Australia indefinitely. They are more consistent with someone whom while being employed overseas is maintaining a continuity of association with Australia. Based on a consideration of all of the factors outlined above, it is concluded that you were be a resident of Australia under the resides test for income tax purposes during the years in question. | Detailed Reasoning - Domicile: 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. 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. In your case, you were born in and are a citizen of Australia. You have not shown any intention of becoming a citizen or permanent resident of any other country. Therefore, your domicile is Australia. Therefore, you will be a resident of Australia under the domicile test, 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: 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; and f) the 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. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. In your circumstances: · You left Australia to work in another country in 20XX. · You were born in Australia; therefore your domicile of origin is Australia. · You maintain Australian bank accounts. · You maintain an investment property in Australia. · You are paid into an Australian bank account. · You have not been granted permanent residency by any other country. · Your visa does not allow you to stay permanently in country X. · When you visit country Y you do this on a tourist visa that does not allow you to stay permanently. · You have not lodged tax returns in any other country. · You have no intention to make country X or any other country your home indefinitely. · You have family in Australia. · While you are in country X you stay in accommodation that is supplied by your employer. · While you are in country Y you stay in a hotel. Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour was not be consistent with someone establishing a permanent place of abode outside of Australia. Although it is your intention in the future to reside in country X and holiday in country Y you enter country X on a working visa that does not allow you to remain permanently and when you enter country Y you do this on a tourist visa which also does not allow you to remain permanently. Accordingly, as your Australian domicile remained unchanged and the Commissioner is not satisfied that you established a permanent place of abode outside of Australia, you are a resident of Australia for income tax purposes under the domicile test. | Detailed Reasoning - Your residency status: As it has been established that you are a resident of Australia under both the resides test and the 'domicile test' there is no need to consider the remaining two tests. As you are a resident of Australian for tax purposes, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.