Edited version of your private ruling

Authorisation Number: 1012521239829

Ruling

Subject: Residency

Question and answer

Are you an Australian resident for taxation purposes?

Yes

This ruling applies for the following period

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

The scheme commenced on

1 July 2013

Relevant facts

You are an Australian citizen and Australia is your country of origin.

You have never been granted permanent residency in another country.

You currently are living and working in country A.

You have a diplomatic visa which expires soon.

You are employed by the Commonwealth Public Service.

It is your intention to resign from your employment in the Commonwealth Public Service and take up a contract with an overseas firm.

You have been offered long term contract work.

Your purpose for remaining in country A is work related.

You recently formed the intention to make your home indefinitely outside Australia.

You do not hold a return airline ticket.

You have no plans to return to Australia between 1 July 20XX and 30 June 20YY. Your future employer may require you to return to Australia to attend meetings but this would amount to a few days at the most in any year. Otherwise, you would only return to Australia in the case of a family emergency.

You have previously lived outside Australia on a posting but you have never made a long term move like this before.

Your assets in Australia include: X properties, household effects in storage, savings and mortgage accounts.

You receive rental income from your properties in Australia.

Your assets in country A include: household effects and a bank account.

Your family home in Australia is rented out while you are away.

Your new employer will provide you with a fully furnished villa in the same area that you currently live.

Your spouse and children will live with you there and you will have sole use of the villa.

Your spouse has a job in country A and your children will continue on at the local school.

While you are in country A you are granted the equivalent of a two year residency visa.

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997

Section 6(1) of the Income Tax Assessment Act 1936

Reasons for decision

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.

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.

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 residency status of individuals who enter Australia, and Taxation Ruling IT 2650 residency status of individuals who temporarily live outside Australia.

It is important to note that no one single factor is decisive and the weight given to each factor depends on individual circumstances.

(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 have a family home and investment properties in Australia and your household effects remain in storage here.

(ii) 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 one factor that is considered along with all of the circumstances of each case.

You are an Australian Citizen.

(iii) History of residence

You have lived in Australia all of your life and have not made a permanent move before.

(iv) Habits and "mode of life"

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.

"Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia." (TR 98/17).

· Your spouse has a job in country A

· your children attend the local school in country A;

· you live with your spouse and children in country A

· in country A you live in accommodation provided by your employer; and

· your household effects and family home are still present in Australia.

(v) Frequency, regularity and duration of visits to Australia

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who 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 to be residing in Australia.

You have no plans to return to Australia between 1 July 20XX and 30 June 20YY. Your future employer may require you to return to Australia.

(vi) Purpose of visits to or absences from Australia

You have returned to Australia for short visits mainly relating to work.

(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

Your spouse and children are living with you in country A.

Business or economic

You have been a Commonwealth government employee in Australia.

Assets

· You have a family home and investment properties in Australia which you rent out while you are in country A,

· You have maintained your Australian bank accounts,

· You stored your furniture in a storage facility in Australia; and

· You have household effects and a bank account in country A.

(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 have a family home in Australia which you rent out while you are in country A.

Summary

As stated above it is important that no one single factor is decisive and the weight given to each factor depends on individual circumstances.

Although you settled into life in country A and spend your time working there, there are several factors outlined above which indicate that you have not ceased to be a resident of Australia.

Specifically:

· You went to country A on a diplomatic posting for work and are considering staying longer as another work opportunity has arisen with a new employer.

· You have a family home in Australia that you rent out whilst you are away

· You have household effects in storage in Australia.

Based on a consideration of all of the factors outlined above you are a resident of Australia according to the resides (ordinary concepts) test as you maintain a continuity of association with Australia for the relevant period.

Other residency tests

Where a taxpayer is found to be a resident under the resides test the other tests of residency do not need to be considered.

Conclusion

You are a resident of Australia under the resides (ordinary concepts) test. You are assessable in Australia on both your Australian sourced and world wide income for the years ended 30 June 20ZZ through to 30 June 20YY.

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