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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your private ruling

Authorisation Number: 1012558407891

Ruling

Subject: Residency

Questions and answers

Will you be a resident of Australia for tax purposes while you are in Country B and Country C?

Yes

This ruling applies for the following periods

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2012

Relevant facts and circumstances

You were born in Country A

You are a citizen of Country A.

You first arrived in Australia from Country A in a previous year under a working visa.

You and your family became Australian permanent residents.

You worked in Australia.

You and your family left Australia and travelled overseas.

While you were travelling overseas, you were offered a employment in Country B.

Your employment in Country B has been extended from the original contract.

Your employer is wishing to extend your contract.

You are paying tax in Country B on your employment income.

You are currently renting in an apartment block in Country B.

You have bank accounts in Country B.

You do not have any assets in Australia.

You hold no sporting or social connections with Australia.

You will be returning to Australia prior to your permanent residency visa running out.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

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

Reasons for Decision

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 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 test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.

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'.

In considering the definition of 'reside', the courts have stated that the word 'reside' should be given the widest meaning.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:

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 Koitaki Para Rubber Estates Limited v Commissioner of Taxation [1941] HCA 13; 64 CLR 241, Williams J stated (at 64 CLR 241 at 249):

You left Australia and travelled overseas. You have been working in Country B. You intend to return to Australia prior to a date due to the permanent resident visa requirements.

(iii) History of residence and movements

You were born in Country A. You have lived and worked in Australia for a couple of years. You and your family left Australia to tour overseas.

You were offered employment in Country B while you were travelling overseas and have not returned to Australia since.

(iv) Habits and "mode of life"

You have commenced working in Country B. You have established accommodation for you and your family by renting in an apartment block, have established local networks and friends in Country B. Your children are attending school in Country B.

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

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.

The Administrative Appeals Tribunal (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 not returned to Australia during the period you have been overseas.

(vi) Purpose of visits to or absences from Australia

The purpose of your absence from Australia was initially to travel overseas. You have since been offered work in Country B.

You have not returned to Australia during your time overseas.

(vii) Family and business ties to Australia and the overseas country

Family

Your spouse and children have accompanied you on your overseas trip and Country B for work purposes. There are no family ties to Australia.

Business or economic ties

Employment

You were working in Australia for a couple of years before going overseas with your family that led to you being offered employment in Country B. You intend to return to Australia on completion of your employment in Country B.

Assets

You do not have any assets in Australia. You have bank accounts in Country B.

Maintenance of Place of abode in Australia

You and your family will return to live in Australia on the completion of your employment in Country B.

You do not own a property in Australia.

Summary

As stated above, no one single factor is decisive, the weight given to each factor depends on individual circumstances, and the word 'reside' should be given the widest meaning.

There are various factors outlined above which indicate that you will not cease to be a resident of Australia while you are overseas. Specifically;

· you will work/live in overseas for a specific period of time, and then you will return to Australia to live prior to your permanent residents visa expiring; and

· you are an Australian permanent resident.

Therefore, you will be residing in Australia in accordance with the ordinary meaning of the word.

You will be a resident under the resides test of residency for the income tax years.

As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency. 

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