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Ruling

Subject: Residency

Question 1:

Are you a resident of Australia for taxation purposes from the 1 July 2012?

Answer:

Yes.

Question 2:

Is your income from your employer assessable income for the full financial year in Australia?

Answer:

Yes.

This ruling applies for the following period:

Year ended 30 June 2013.

The scheme commenced on: 1 July 2012.

Relevant facts:

· You are a citizen of country X.

· You hold a current permanent residence permit for Australia.

· This permit was granted as you are married to an Australian.

· You lived in Australia from early X to early X.

· You were working for a company and paid tax in Australia during this time.

· You have lived in country X, your home country, from X until recently.

· You are in the process of moving to Australia with your family, so that your spouse and child can be near family and friends.

· You will be keeping your job as a professional with a company from country X.

· Your employer will continue to pay you in foreign currency, into a foreign bank account.

· Your employer currently deducts tax and pays this to an overseas tax office.

· You will reside, from the 1 July 2012 in Australia for approximately 6 months of the year.

· Your family and you will reside in country X approximately 3 months a year.

· You will be in country X alone for periods of 3-4 weeks at a time, a few times a year (this is in addition to the longer period stated earlier).

· You estimate that the total time spent in country X will be slightly above 20 weeks per calendar year (a tax year for country X).

· The exact amount of time is unknown as this is dependent on your employer and the projects you are involved in.

· You own a townhouse in Australia, which is your residence whilst in Australia.

· You and your spouse hold bank accounts in both country X and Australia.

· You work full time.

· You will have no Australian sourced income apart from the salary and wages earned from your work as a professional.

· You own an apartment in country X that you will live in whilst overseas.

· Your family have close social ties in both country X and Australia.

· Your spouse and child will reside in Australia approximately 9 months a year.

· Your spouse will work part time in Australia.

· You and your family intend to live both in Australia and country X in the future.

Assumptions:

N/A

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1936 Section 23AG.

Income Tax Assessment Act 1936 Subsection 160AF(1).

International Tax Agreements Act 1953.

Reasons for decision

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 will still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. 

The 'resides' test

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'.

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.  

All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:

· intention or purpose of presence;

· family and business/employment ties;

· maintenance and location of assets; and

· social and living arrangements.

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

In Australia:

· you and your spouse own property which you make your permanent home whilst in Australia,

· you reside with your spouse and child,

· you work full time,

· you intend to live in Australia for approximately 6 - 7 ½ months in the calendar year. For the remainder of the year you will work and live in country X, with your spouse and child joining you for only 3 months of this time,

· it is your intention to make your home in Australia and country X, and

· you have family and social ties in both Australia and country X.

As per Taxation Ruling TR 98/17 residency status of individuals entering Australia; whether a considerable time has elapsed to demonstrate that the individual's behaviour has the required continuity, routine or habit is a question of fact; that is, it depends on the circumstances of each case.

When behaviour consistent with residing here is demonstrated over a considerable time, an individual is regarded as a resident from the time the behaviour commences.

Therefore, under the resides test, you are considered to have been residing in Australia from the 1 July 2012.

The domicile test and permanent place of abode 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. 

A persons domicile is established at birth when they acquire a domicile of origin, being the country of their fathers permanent home. The domicile of origin is retained until such time as a domicile is established by choice or by operation of law in another country.

In order to show a new domicile of choice, the person must be able to prove an intention to make his or her home indefinitely in that country. A domicile may be changed by operation of law for example where a person has obtained a migration visa.

You have demonstrated that you wish to make your domicile of choice Australia as you have a permanent residency permit, as a consequence of your spousal relationship here.

As you have made your permanent place of abode in country X and in Australia, the Commissioner is not satisfied that your permanent place of abode is outside of Australia. Therefore you are a resident as you have changed your domicile of choice.

The 183-day test

You will satisfy the definition of resident for Australian taxation purposes where you are in Australia for more than half of the income year (i.e. at least 183 days).

An exception exists where the Commissioner is satisfied that the individuals' usual place of abode is outside Australia and there is no intention to take up residence in Australia.

For example where an individual is in Australia from February to November, they would not be treated under this test alone as a resident, as they would not be in Australia for more that half of either year.

The minimum 183 days does not need to be continuous. Separate visits within an income year will be added together.

A business migrant that is present in Australia for 183 days in an income year is likely to be an Australian resident Taxation Ruling IT 2681.

The Full Federal Court commented that a person may be a "bird of passage" and have no usual place of abode anywhere, as such prima facie be a resident of Australia if present here for at least 183 days.

For this year you are in Australia for more than 183 days. The exception does not apply to you, as you have made a home here and have a current intention to keep living in Australia and therefore you are considered a resident under the 183 day test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.   

You are not a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status in Australia

As you are considered to be a resident of Australia under the resides test, you will be a resident of Australia for taxation purposes for are full financial year from the 1 July 2012 to 30 June 2013.

Assessability of income

As you are an Australian resident taxpayer you will be taxed in Australia on any ordinary income that you receive directly or indirectly from all sources in or out of Australia during the income year under subsection 6-5(2) of the ITAA 1997.

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