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Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on:

1 July 2012

Relevant facts

You were born in country T, migrated to Australia and became an Australian citizen.

You have a spouse and adult children.

You have been employed by company Z Australia for a number of years.

You departed Australia on to take up a work assignment with company Z country Y office.

The employment contract in country Y may be extended due to the following:

· you may be asked by your employer to stay for a longer period;

· you may request to remain for a longer period; or

· you maybe be required to take up another assignment at another location.

You entered country Y on an employment pass visa which is valid for set period.

While in Country Y you reside in accommodation leased by your employer.

In addition accommodation costs, including utilities and a fully maintained motor vehicle in Country Y are also paid for by your employer.

You also receive a cost of living allowance to compensate you for differences in the cost of living between Australia and Country Y

Your remuneration is determined and awarded in Australia, and is tax - equalised according to your overseas assignment conditions.

Part of your salary is paid into your Australian bank account to help you meet your ongoing financial commitments in Australia. The remainder of your salary is paid into a country Y account to pay for local expenses.

Your employer provide both you and your spouse with an annual return ticket to Australia.

All of your Australian leave entitlements that you held prior to your departure from Australia have been frozen until you return to Australia.

Your employer is continuing to make superannuation contributions to your Australian superannuation fund.

The assets that you hold in Australia consist of;

· a family home (currently being tenanted);

· investment properties (all either rented or available for rent);

· bank accounts; and

· motor vehicle, motor cycle and other personal items.

Prior to your departure the bulk of your household possessions were placed in storage.

Since working in Country Y you have started to accumulate cash.

You and your spouse continue to maintain your Australian bank accounts.

You do not hold or intend to acquire any property in country Y.

You are paying income tax on your salary to the country Y authorities and are considered a country Y resident for income tax purposes. Your spouse is also considered a resident of country Y for tax purposes.

Since departing Australia you have returned on one occasion for a short period for work purposes and are planning another short trip to Australia.

Due to the nature of your employment during you period that you will working in country Y you will be required to make a number of short trips to Australia for work purposes.

You are also planning a holiday in Australia to visit family and friends.

Your spouse will accompany you to country Y.

Your spouse intends to return to Australia on only 1 occasion during your overseas assignment.

Your adult children did not live with you prior to your departure from Australia.

Your Australian sporting and social ties consist of a network of friends in Australia.

You have not established any substantial sporting or social ties in country Y.

Neither you nor your spouse have never been a Commonwealth Government of Australia employee.

You intend to return to Australia on completion of the assignment in country Y.

Relevant legislative provisions

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

Income Tax Assessment Act 1936, Subsection 6(1).

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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.  These tests are:

· the resides test

· the domicile test

· the 183 day test

· the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650.

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 satisfy 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'.

TAXATION RULING IT 2650: RESIDENCY - PERMANENT PLACE OF ABODE OUTSIDE AUSTRALIA, provide guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay.

The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states:

The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.

You left Australia accompanied by your spouse, to live and work in country Y for a period. with a possibility of an extension. Since you will be physically present in country Y during this period, you will not be considered to be residing in Australia according to ordinary concepts under this test. Therefore, you are not a resident of Australia for income tax purposes under the 'resides test'.

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.

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.  From the information that you have provided, you were born in Country T, however you moved to Australia and became an Australian citizen, therefore adopting Australia as your domicile of choice. From the information you have provided you do not intend to become a citizen of Country Y, therefore it is considered your Australian domicile is unchanged.

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.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

· the intended and actual length of the taxpayer's stay in the overseas country;

· 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;

· 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;

· whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

· the duration and continuity of the taxpayer's presence in the overseas country; and

· 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 your case:

· you departed Australia to live and work in country Y for a period with the possibility of an extension;

· you intend to return to Australia upon completion of your overseas assignment;

· you entered country Y on an employment pass visa which is valid for the duration of your assignment;

· you live in rental accommodation provided by your employer;

· you have a number of investment properties including your family home in Australia, which is being rented out while you are in country Y;

· you are maintaining your Australian bank accounts; and

· your Australian investments are being serviced in part by your salary earned while you are in country Y.

On the balance and based on the above, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia, particularly given that it is your intension to live and work in country Y for a period, not withstanding any extension. This is not considered to be a substantial period. In addition you live in company provided accommodations, you are continuing to maintain family home and your Australian bank accounts. Further, your salary is used in part to service your ongoing Australian financial commitments.

Therefore, as you have not established a permanent place of abode outside of Australia and you have maintained an Australian domicile you are a resident of Australia for income tax purposes under the domicile test outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.

As you are a resident of Australia under the domicile test there is no need to consider the remaining 2 tests.

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