Edited version of your private ruling

Authorisation Number: 1012549217174

Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for taxation purposes for the period you are overseas?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2010,

Year ending 30 June 2011,

Year ending 30 June 2012.

The scheme commenced on:

1 July 2009.

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 are a citizen of Australia, and your country of origin is Australia.

You haven't been granted permanent residency by any other country.

Prior to your departure overseas you were living in Australia with your spouse, in your jointly owned home.

You departed Australia in 20yy for an overseas country and returned to Australia in 20zz.

You had a visitor's visa for one month until you were granted a residency visa.

The visa did not allow you to stay permanently.

You had an employment contract overseas.

Your intention was to reside overseas for a minimum of two years and up to four years (the contract was for two years with automatic renewal for a up to a further two years).

You renewed your employment contract for a year but returned to Australia before that year was up, because of the ill health of your family.

In 20yy, your employer flew you overseas prior to commencement of the contract to see if you would be happy living there.

You had no fixed plan of return to Australia, although the maximum time you had under the contract was four years.

You did not hold a return air ticket.

You made several brief visits back to Australia predominantly to holiday.

Your overseas residence was a house you rented.

Your employer did not provide you with accommodation apart from for the first few weeks after you arrival, until you were able to rent your own place.

You did not have any assets overseas.

You retained your home in Australia. Initially this was given over to family to use as their residence, rent free, so that they could save for a place of their own.

Apart from your home you had the following assets in Australia:

(a) A few minor investments - shares and bank accounts,

(b) Household effects, and

(c) A car.

You received Australian dividends.

You did not have any position or job held for you in Australia.

Your spouse joined you at your rented accommodation after one month. However after a stay of approximately X months, they returned to Australia. Your children are independent adults.

The utilities of the Australian house were in your spouse's name.

You did not have any social or sporting connections with Australia.

You were a member of a gym overseas.

Neither your spouse or you were employees of the Commonwealth Government of Australia.

Given that you intended to return to Australia you did not consider it necessary to advise the Australian Electoral Office to have your name removed from the electoral roll.

You did not think to advise investment entities or your bank of your foreign residency, nor Medicare or health insurance provider.

You were not required to lodge a tax return overseas.

A joint Australian account was maintained for convenience due to overseas restrictions.

You were responsible for arranging and paying for all the usual utilities relating to the rental property (water, electricity, telephone and internet).

No superannuation contributions were made by or on behalf of you during your time overseas.

You have provided a copy of your employment contract:

· You were engaged as holding Australian nationality with approved domicile in Australia.

· It states you were appointed on a temporary basis.

· You were paid lump sum monthly salary.

· It states the contract term of X years renewable, but not to exceed X years.

· It states you will be provided with suitable accommodation.

· It outlines expenses your employer will pay on your behalf.

· It states you will be provided with a car.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Subsection 6(1).

Income tax Assessment Act 1997 Section 6-5.

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

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

· the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

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 IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia. It is important to note that not 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.

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 FC of T (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.

You were working overseas for approximately X years, and during this time you returned to Australia on several occasions for holidays and work.

(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 a citizen of Australia and your overseas employment contract recognises this fact.

(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.

Prior to going overseas, you lived and worked in Australia with your family.

You are going overseas for work purposes. You have a resident visa which allows you to work and live overseas for a total of X years whilst you are employed.

Your spouse lived with you overseas for X months before returning to Australia. You joined a gym overseas and were supplied a car by your employer. You retained your Australian assets including a bank account, investments, a home and car. You intended to return to Australia after your employment was finished, however you returned earlier to care for sick family members.

(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.

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 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 be a resident of Australia for income tax purposes.

In 2009, your employer flew you overseas period prior to commencement of the contract to see if you would be happy living there. You commenced work soon after.

You returned to Australia several times, over the period of your employment, predominately for holidays. You returned to Australia permanently in 2012.

(vi) Purpose of visits to or absences from Australia

You did not intend on returning to Australia except for brief visits for the duration of your work contract.

(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

The Macquarie Dictionary defines 'family' as:

· parents and their children, whether dwelling together or not.

· one's children collectively.

· any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins.

Consistent with the findings in ../../../uca53/Local Settings/Temporary Internet Files/Sam Lee ruling (3).doc - _ftn17#_ftn17#_ftn17#_ftn17Case 5/2013../../../uca53/Local Settings/Temporary Internet Files/Sam Lee ruling (3).doc - _ftn18#_ftn18#_ftn18#_ftn18 and Iyengar, and the definition of family provided by the Macquarie Dictionary, your family has not accompanied you overseas, except for a brief period where your spouse lived with you before returning to Australia.

Business or economic ties

You have worked overseas for approximately X years.

Assets

You have a home in Australia which will be occupied by family while you are overseas. You will keep an Australian bank account, car and investments.

Your case is similar to the taxpayer in the Iyengar case where the taxpayer was found to be a resident of Australia for tax purposes. In that case the taxpayer did not purchase substantial property whilst overseas, but retained assets in Australia.

(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 retain ownership of Australia assets, including your family home.

Summary

As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically;

· Your visa did not allow you to stay overseas permanently.

· Your employment contract could only be approved for a maximum set period of several years.

· You renewed your employment contract for a additional year after being employed for X years, but returned to Australia after X years, X months and X days to care for unwell family.

· You have a home to return to in Australia, and other assets such as a car and investments.

· Your employment contract states that you would be provided with accommodation and a car.

· You did after a period of time arrange to have your name on a rental contract.

· No family maintained a living arrangement with you overseas. Your spouse lived with you overseas for X months.

· You intended to return to Australia at the duration of your employment.

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

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 to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Australia. You have not indicated that you have changed or are going to change your domicile. Your domicile is therefore Australia.

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

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 a person intends to live for the rest of his or her life.  An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia for the following reasons:

· You maintain a home in Australia.

· You have a visa which will not allow you not live overseas permanently.

· You have not been granted permanent residency.

· Your employment contract was for a maximum of X years. You only stayed overseas for just over X years.

· You did not purchase assets overseas such as a home or car.

· You were provided accommodation by your employer and later you rented accommodation.

You are a resident under this test.

The 183-day test

When a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You are not a resident under this test as you were not in Australia for 183 days or more in a financial year.

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. 

Only Commonwealth Government employees are eligible to contribute to the CSS and PSS. As you and your spouse were not a Commonwealth Government of Australia employee and you are over the age of 16 you will not be treated as a resident under this test.

Residency status:

You are a resident of Australia for taxation purposes for the period you are overseas.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).