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Edited version of your private ruling

Authorisation Number: 1012417166111

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

The scheme commenced on:

1 July 2012

Relevant facts

You were born in Australia and are a citizen of Australia.

You have a spouse and dependants.

You have been offered an employment contract working in country C for a period of time.

The nature of the employment contract is such that it can be extended indefinitely depending on your performance and the ongoing demand for services.

If given the option to extend the contract beyond the initial period, the decision on whether you accept this extension would be based on whether you are enjoying living and working overseas.

You intend to depart Australia to begin the contract, although the exact date is yet to be established.

You will enter country C on an employment visa that will be arranged by your overseas employer.

As a consequence of you employment contract you will receive an accommodation allowance that you will use to rent a house/apartment.

Due to a clash in school years between country C and Australia, and the fact that the finishing certificate is not offered overseas your children will remain in Australia to continue their studies. As a result, your spouse will also remain in Australia to care for your children.

The employment contract provides that you are entitled to a business class return fare to Australia. You intend to utilise this to return to Australia during a break from your employment.

When you return to Australia you will stay with your family at your family home.

Your assets in Australia consist of your family home in and your superannuation funds which can only be accessed upon your retirement.

You do not have any overseas assets.

As you lived your entire life in Australia, you have extensive social and sporting connections in Australia.

You do not have any social or sporting ties overseas.

You have been employed by the Commonwealth of Australia.

The income that you derive overseas will be used to support your spouse and children in Australia.

Your intension is to for fill your overseas contract and return to Australia.

Relevant legislative provisions

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

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

Reasons for decision

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose 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 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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 TR 98/17 focuses on the quality and character of an individual's behaviour while in Australia (which includes, in addition to family and business ties, factors such as intention or purpose of presence, social and living arrangements, and maintenance and location of assets), in conjunction with the period of physical presence in Australia.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.

In your case, while it is acknowledged that you will spend extensive periods overseas for filling your employment obligations, the fact remains that your ties to Australia will continue to be stronger than they are overseas. This is mainly due to the fact that your spouse and dependants will continue to reside in Australia, and your intension to return to your family and family home in Australia during your breaks from employment. Further at this stage your employment country C is only definitely going to be for set period of time at which point you intend to re-assess whether to accept any extension. This period of time is not considered to be a sufficient period of time to establish one's settled or usual place abode in an overseas country. In addition the income that you derive in country C will be used to support your family in Australia. These factors indicate that you are maintaining your Australian place of abode, while working overseas.

Therefore, consistent with the principles established in Iyengar's case you continue to be a resident of Australia for taxation purposes under the 'resides test'.

As it has been established that you are a resident under the 'resides test' there is no need to consider the remaining 3 tests.

Your residency status

As you are a resident of Australia under the 'resides test' outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are an Australian resident for income tax purposes for the income year included in this ruling.

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