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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012528510247

Ruling

Subject: Residency status

Questions and answers:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following period(s)

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commences on

or after 1 July 2012

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

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

You have a spouse and adult children.

You are employed by organisation XYZ.

Organisation XYZ (XYZ) has an agreement whereby they provide consultancy services to organisation ABC (ABC) in country T.

As provided under this agreement you provided consultancy services on an audit project with ABC in country T.

After completing the audit project, you accepted a request made by the CEO of ABC for you to continue serving as a consultant.

Due to skill deficiencies being identified by the CEO of ABC, ABC approached XYZ and requested support to supplement the skill deficiencies.

A secondment agreement was established between the two entities, which you accepted.

Your employment income that you derive from being seconded to ABC is such that ABC remunerates XYZ for your services, which intern remunerates you.

Prior to leaving Australia you relinquished your position at XYZ to take up the secondment with ABC. You can only return if a job opportunity exists. At present your team at XYZ are looking at implementing redundancies so it is highly unlikely that you will be able to return to your job in Australia.

Your employment contract is being renewed for a number of years.

When you left Australia you stated on your Australia Immigration outgoing passenger card that you were leaving for business purposes.

You entered country T on a work permit visa which is renewed annually by your employer.

While in country Y, you have leased 2 residences, 1 prior to your spouse's arrival in country T and 1 post your spouse's arrival in country T. ABC pays for your lease accommodation expenses.

You have purchased all household goods and appliances to furnish the residences.

Prior to leaving Australia you lived in your family home.

This home is now being occupied by your adult child (rent free). You return to this home when visiting Australia.

You have taken some of your personal items with you to country T while others have remained in Australia.

Your Australian household affects have remained in Australia due to your adult child occupying your Australian residence.

Your spouse was an Australian Commonwealth Government employee and a contributing member of the PSS Scheme during this period.

For a period your spouse took leave from their employment to join you in country T.

Shortly after, your spouse was made redundant from the Australian Public Service, therefore ceasing to be a contributing member of the PSS scheme.

Your spouse is now in receipt of a Comsuper pension.

Prior to leaving Australia you did not advise any companies or any State or Federal Authorities including Medicare etc of your intention to leave Australia indefinitely as your spouse continued to work for the Commonwealth Government and was a PSS contributor.

Now that your spouse has left the Australian public service you will notify the relevant authorities.

You did not cancelled your health insurance policy as your spouse was still living in Australia, however now that they have left Australia you will investigate your options.

Your employer provides you with a number of return trips to Australia per year. You and your spouse utilise these trips to return to Australia for short periods to visit family and friends.

Your assets in Australia consist of your family home, and motor vehicles which are being lent to your adult children

The remuneration that you receive from your secondment is used to pay for living expenses for you and your spouse in country T and support your adult children in Australia.

You severed all sporting ties with Australia upon you departure.

Your social and sporting ties in country T consist of memberships to various sporting clubs and activity groups as well as a network of local friends that you regularly socialise with.

You intend to live in country T for an extended period of time possible permanently.

You formed this intention 2 years after arriving in country T.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Residency

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 first two tests are examined in detail in TAXATION RULING NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia.

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 a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests.

The resides test

In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; (2002) 51 ATR 1173 at paragraph 43-44, it was determined that the word 'resides' should be given the widest meaning.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia, identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes.

According to paragraph 20 of TR 98/17 factors to be considered in determining residency in Australia are: 

Paragraph 21 of TR 98/17 further states that:

Recent case law decisions have expanded on the list of factors identified in TR 98/17.  Case 5/2013 and Sneddon v FC of T (Sneddons Case), for example, considered the following factors in relation to whether the taxpayer resided in Australia: 

Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1).

Physical presence in Australia

A person does not necessarily cease to be a resident of a particular place just 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 (Joachim v Federal Commissioner of Taxation 2002 ATC 2088, at 2090).

In recent court cases taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia.

In Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (Iyengar's Case), it was indicated that there is a requirement that you at least be physically present in Australia for part of an income year. Further in this case it was considered that the taxpayer remained a resident of Australia for income tax purposes even though during the period he was working overseas (2 years and 7 months) he had only returned to Australia for a two week period and for a 10 day period.

In your case, you left Australia for employment purposes. Your employment contract provides for a number of return trips to Australia per year. You and your spouse utilise these trips by spending short periods in Australia per trip.

While it is acknowledged that your presence in Australia are for brief periods, consistent with the principles established in the Iyengar's case, we consider that this presence will be sufficient to demonstrate that you maintaining an ongoing continuity of association with Australia for the years included in this ruling.

Nationality

In Iyengar's Case, it was noted that in most cases, the nationality of a person would not be a factor to be taken into account along with other circumstances in determining where his or her residence is. However, in cases that could go either way, the citizenship of a person may not be completely irrelevant in the conclusion to be drawn from all the relevant facts

In your case, you are an Australian citizen and from the information that you have provided your employer annually renews your Country T employment visa for the purpose of your continued employment service. Further you have not indicated whether you have sought a more permanent residency status in Country T.

History of residence and movements

In Iyengar's Case, the Tribunal noted that both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident (for taxation purposes) in a country in a particular income year. Significant in Iyengar's Case is that when he for filled a long term overseas employment opportunity he would return to his home in Australia for a break before leaving Australia and taking on another overseas employment opportunity.

In your circumstances, you were born in Australia where you have lived with your family until you accepted an overseas secondment and moved to country T.

While your circumstances differ from those in Iyengar's Case, what is consistent is that you left Australia for the purpose of pursuing an employment opportunity. This adds significant weight to the conclusion that had this opportunity not existed, you would have remained in Australia and therefore would have ordinarily continued to reside in Australia. Further when you return to Australia you stay in you family home.

In light of the above and consistent with the principles established in Iyengar's Case, your history of residence and movements are not consistent with someone who is no longer residing in Australia.

(iv) Habits and "mode of life"

In recent cases a taxpayer's habits and mode of life in the country where they are/had been living were considered when determining whether a taxpayer continued to be a residence of Australia for income tax purposes.

In Sneddon's Case, the taxpayer who was found by the court to be a resident of Australia for tax purposes lived in a fully-furnished apartment leased by his overseas employer. The taxpayer's only expenses were his every day living expenses and some furniture and household items that he purchased to make the fully-furnished apartment, provided by his employer more comfortable. Further his employment income was paid in Australian dollars into an Australian bank account and predominantly used to meet his Australian obligations.

Although it is your option to select the style of accommodation that you wish to live in while you are working in country T, once found your employer pays the lease expenses. This gives rise to the conclusion of the accommodation being employer provided. Therefore the only distinction between your circumstance and that provided in Sneddon's Case is that you were required to furnish the accommodations. Further consistent with Sneddon's Case your remuneration is being paid into an Australian bank account and with regards to your presence in country T you are only required to pay for your everyday expenses.

In Iyengar's Case, the taxpayer stated that family and friends visited and stayed in his overseas residence on numerous occasions. Further he was a member of several overseas sporting and recreational associations in the overseas country where he employed. However the court held that these activities were considered normal pursuits for most normal expatriate persons who are employed abroad

Since your arrival in country T you have established a number of social and sporting ties and a network of local friends that you regularly socialise with. Consistent with the principles established in Iyengar's Case, these activities are normal pursuits for most normal expatriate persons who are employed abroad and therefore do not add any weight in determining your residency status for income tax purposes.

In considering the above and based on the findings in Sneddon's Case and Iyengar's Case, your habits and mode of life are consistent with someone who has not ceased to be a resident of Australia for tax purposes for the years contained in this ruling.

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

In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 (Lysaght's Case) the Court noted that mere fact that visits to a country are of short duration does not of itself exclude residence in that country.

Further as previously discussed, when considering the issue of return visits to Australia by a taxpayer who was living and working overseas, the Tribunal in Iyengar's Case also noted that the brevity of a visit to a particular country compared to length of time spent abroad does not of itself exclude an individual from being a resident in the country visited. Further, the taxpayer in Iyengar's Case 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 and was also considered to a resident of Australia for income tax purposes.

Your employment contract affords you a number of return trips to Australia per year. You have utilised these trips to return to Australia for short periods to visit family and friends. The fact annual return trips to Australia are a provision of your employment contract, can be considered an admission from your employer of the ties that you have with Australia, and an aid for you to continue your association with Australia.

Considering the above and the principles established in Iyengar's Case and Lysaght's Case, we do not consider the frequency, regularity and relatively short duration of your visits to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes post your departure from Australia.

(vi)  Purpose of visits to or absences from Australia

In Iyengar's Case, the evidence was that Mr Iyengar's intention was to go to Dubai (and later Doha) and work for Maersk for as long as it took to complete his Contract and then to return to Australia, which he did. His motivation for doing so was to use the money he earned under the Contract to pay down the mortgage on the Winthrop home as soon as possible. Such an intention (and motive) is indicative that Mr Iyengar was an Australian "resident" in the relevant period.

In considering the purpose of your absence from Australia, you have stated that your absence from Australia was for work purposes particularly fulfilling your employment responsibilities that you were seconded to ABC in country T. Further you stated on you immigration outgoing card that the reason for your departure was for work purposes.

The details of your return trips to Australia are discussed above. The fact that you return to Australia on a number occasions annually is a clear indication that you are continuing to maintain a continuity of association with Australia whilst living in country T.

In light of the above, the purpose of your visits to Australia are clearly for the purpose of maintaining your continuity of association with Australia while your absences from Australia are for employment purposes. These actions are sufficient to preclude you from being considered a non resident of Australia for taxation purposes in each of the income years included in this ruling.

(vii) Family, assets, business ties to Australia and the overseas country or countries

In Iyengar's Case, the court held that, despite the fact that Mr Iyengar spent almost 2 years and 7 months working in Dubai and later Doha for Maersk, his family ties with Australia were such that he remained a "resident of Australia" in the relevant years of income. That is, after moving to Australia from India in 1998 he and his family took the step of becoming Australian citizens 2003 and acquiring a home in about 2003. While he was overseas working on the Contract for Maersk, his wife, daughter and son remained in Australia (except for three short visits to Dubai by his wife), his most substantial asset (the Winthrop home) was located in Australia, he used almost all of the money he earned abroad to make accelerated payments on his Australian mortgage on the Winthrop home (which he acknowledged he considered to be the "family home") and he took his holidays (albeit short) in Australia at the Winthrop home with his family: Shand and Crockett.

In your case, you accepted a secondment from your Australian employer to work for ABC in country T. After a period your spouse joined you in country T. Your adult children have remained in Australia. Since your departure you have remained an Australia citizen. Your most substantial asset has remained your home in Australia, which you return to when you visit Australia. This home is being occupied by one of your adult children rent free. The income that you derive from your overseas secondment is paid by your Australian employer into an Australian bank account and is used to pay for every day living expenses in country T and help support your children in Australia in their tertiary pursuits. The balance once your expenses are paid is invested.

In applying the principles established in Iyengar's Case to your particular circumstance, it is acknowledged that that your family ties are stronger in country T due to your spouse residing with you in country T. However your Australian home remains your most substantial asset and it is here that you return to when visiting Australia. This is in contrast to country T where your major assets consist of your household furnishings. Significant is that you continue to be employed and remunerated by your Australian employer, into an Australian bank account. This demonstrates that your business is far stronger in Australia.

Therefore, based on the above and consistent principles established in Iyengar's Case and based on the above, your family, assets and business ties to Australia and country T preclude you from being considered non resident for income tax purposes.

Maintenance of Place of abode

In Iyengar's Case, the court held that another important factor in determining whether or not a person has ceased to be resident in a particular country is whether the person maintains a 'place of abode' in that country, whether owned by them or not, when they are absent from that country. In Australia, the maintenance of a home in a particular place has usually arisen in relation to the question whether the taxpayer had a "permanent place of abode" outside Australia within the meaning of the first statutory test (the domicile test) in section 6(1)(a)(i) of the ITAA 1936.

In your case, while in country T you and your spouse live in leased accommodations. The lease for theses accommodations is paid by your employer. In contrast you own a home in Australia which you return to when you visit Australia. This home has remained fully furnished and is occupied rent free by one of your adult children.

In light of the above it is considered that you are continuing to maintain a place of abode in Australia particularly given that you return to this home when returning to Australia. These actions are not consistent with someone who has ceased to be a resident of Australia for income tax purposes.

Conclusion

It is acknowledged that your spouse has accompanied you to country T, you are living in self furnished accommodation and you have a circle of friends and have engaged with several sporting and social clubs in country T.

With regards to the remaining factors and the findings in recent case's including Sneddon's Case, Iyengar's Case and case 5/2013, all of whom were found to be residents of Australia for income tax purposes the following are significant. You employer is paying your accommodation expenses. You return to Australia on a number of occasions annually for personal reasons and stay in your family home. You have remained a citizen of Australia and your employer is required to renew your work permit annually. Your ongoing employment is also required to be renewed. Your ties in terms of material assets are far substantial in Australia than in country T. Significantly, you are still an employed by your Australian employer, who remunerates you for the services that you provide in country T through an Australian bank account.

In consideration of all of the factors outlined above, it is concluded that you will continue to be a resident of Australia under the 'resides test' for income tax purposes during the income years that are included in this ruling.

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. In your case you were born in Australia and therefore you have an Australian domicile. From the information you have provided you have not demonstrated any intention of becoming a country T citizen, therefore your Australian domicile remains 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.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

Your circumstances are as follows:

Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour is not consistent with someone establishing a permanent place of abode outside of Australia.

Significant in reaching this conclusion is that while it is your intension to remain in country T indefinitely, this desire is dependant on your employer renewing your work permit in country T, which is done on a yearly basis. You have remained employed by and remunerated by your Australian employer. The assets that you hold are far more substantial in Australia than in country T. Further you are living in employer sponsored accommodations.

Accordingly, as your Australian domicile will remain unchanged and the Commissioner is not satisfied that you have establish a permanent place of abode outside of Australia, you will continue to be a resident of Australia for income tax purposes in the years that are included in this ruling under the 'domicile test'.

Conclusion

As it has been established that you will continue to be a resident of Australia for income tax purposes under both the resides test and the domicile test, there is no need to consider the remaining 2 tests. Therefore you will continue to be a resident of Australia for income tax purposes for the income years included in this ruling under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.

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