Private ruling: Residency
Published: May 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: Your country of origin is Country X. You and your spouse are citizens of Country X and Australia. You lived in Australia for a number of years. You left Australia to relocate to Country Y. The purpose of moving to Country Y is to take up employment on a project which is expected to take two to five years. You are in Country Y on an employment pass (EP) visa which is valid for two years. The EP enables you to work and live in Country Y and travel in and out of the country freely. You are not permitted to work in Country Y without a valid EP. It is the responsibility of your employer to maintain proper visas and permits at all times. Your employment contract states the following at item 10 'work permits/visas (d): The employee is obligated upon termination to present their passport to the Employer for cancellation by the local Government agency of any special endorsements issued in connection with employment by the Employer, the intent being to relieve the Employer of responsibilities resulting from sponsorship of the employee following termination. Your employment contract is signed until mm/yyyy you then expect you will sign with the new employment contract for a minimum of two years. Prior to departing Australia you were living in your own house which you sold prior to departing Australia. You moved all of your personal belongings to Country Y and large furniture items have been placed into storage in Australia. You have leased an apartment in Country Y for two years. Your employer pays you an accommodation allowance as per your contract which states you are entitled to an accommodation and transportation allowance. Your assets in Australia include superannuation, bank accounts, rental property and personal effects which have been placed into storage. Your rental property will be rented for the next few months and then it will be renovated. Once renovations commence you will return to Australia up to three times a year to check on the progress of the renovations. Assets in Country Y include some furniture and a bank account. You have advised all of the relevant authorities like the Australian electoral office, financial institutions, Medicare that you are leaving Australia permanently. Neither you nor your spouse have ever been Commonwealth Government of Australia employees. You intend to return to Australia in two to five years after completion of the employment project.

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

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. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. 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 Income Tax: residency status of individuals entering Australia , and Taxation Ruling IT 2650 Income Tax: residency status of individuals who temporarily live outside Australia. Taxation Ruling TR 98/17 states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. 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 move to Country Y to take up employment on a project that is expected to take two to five years to complete. You plan to return to Australia up to three times a year to check on your rental property. Although you will not be physically present here for the majority of the time as you will be working in Country Y, 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: Your country of origin is Country X. You are citizens of Australia and Country X. | Detailed Reasoning - (iii) History of residence: You lived in Australia for a number of years before leaving to move to Country Y. | Detailed Reasoning - (iv) Habits and "mode of life": You moved to Country Y for work purposes and intend to live there until you finish the work project which is expected to take two to five years. Your Employment Pass (EP) is issued to you on the condition that you remain employed in Country Y and you are not permitted to work in Country Y without a valid EP. You intend to return to Australia at the completion of your employment in Country Y. You are living in rental accommodation in Country Y and your employer pays you an accommodation allowance. You have retained Australian bank accounts and your rental property which is being renovated while you are in Country Y. Your decision to retain these, in addition to the fact that you relocated for employment purposes, and you intend to return to Australia at the completion of your employment, indicates 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 will return to Australia up to three times a year to check on your rental property which will be undergoing renovations. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You moved to Country Y for employment purposes. Your return visits to Australia will be short in length and to check on your rental property. | 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. Family You do not have any dependant children and do not have any family members in Country Y. Business or economic You have taken up an employment contract in Country Y for the next two to five years. Assets Your assets in Australia comprise of a rental property, bank accounts, superannuation and personal effects (large items of furniture) in storage. Your assets in Country Y are furniture items and a bank account. It is evident that you have a higher value of assets in Australia than in Country Y. | 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 sold your primary residence in Australia before moving to Country Y. You own another property in Australia which is a rental property. | Detailed Reasoning - Summary - 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 the next two to five years, there are various factors that indicate that you have not ceased to be a resident of Australia. These are primarily: • you are an Australian citizen • you have a restrictive visa, an EP that only allows you to work in Country Y while you are sponsored by your employer. If your employment is terminated for any reason you are required to hand your passport to your employer for cancellation. • You intend to return to Australia upon completion of your employment project • Your accommodation in Country Y is indirectly paid for you by your employer in the form of an accommodation allowance under your contract of up to $X per day. • You have stronger financial ties to Australia as you have more assets in Australia • You are maintaining an Australian rental property, a superannuation fund, bank accounts and have personal items stored in Australia. 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. | Detailed Reasoning - Your residency status: As you meet the resides test, you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), your assessable income includes income gained from all sources, whether in or out of Australia. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid overseas. Please refer to our website www.ato.gov.au for further information regarding foreign income tax offset. You may also be entitled to relief from taxation under the terms of the International Agreement between Australia and County Y for the prevention of double taxation.