Edited version of your private ruling

Authorisation Number: 1012568417990

Ruling

Subject: Residency and missionary donations

Question and answer

Are you a resident of Australia for tax purposes?

Yes.

Are the donations you receive from family and friends, in relation to your voluntary work with a international organisation assessable income?

Yes.

This ruling applies for the following period

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2012

Relevant facts

Residency

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

You have never been granted permanent residency in another country.

You are currently living and working in country A.

You have a visa that does not allow you to remain in country A permanently.

You work for an international organisation.

You departed Australia a while ago to work in country A.

You plan to extend your visa for an extra year if possible.

Your purpose for remaining in country A is work related.

You do not hold a return airline ticket.

You have not returned to Australia since you left..

It is your intention to return to Australia when your work is finished.

Your assets in Australia include a joint bank account and household effects kept in storage.

Your assets in country A include a car, a computer and a joint bank account.

You live in a rented furnished apartment in country A.

In Australia you lived in provided accommodation.

You do not own any property in Australia or country A.

Your spouse and children live with you there and your children attend school in country A.

Your spouse is also a volunteer and works with you in country A.

In Australia you do not have any sporting connections but have social connections through church friends and family.

In the country A you have social connections through the team that you work with.

You have stated on your Australian Immigration Outgoing passenger card that your reason for going overseas is to be a missionary or pastor.

Income

You live solely on financial gifts from your churches, friends and anonymous givers.

The donations are to pay your rent, your children's schooling fees and general living expenses while you are living overseas doing your work.

You and your spouse have jointly received $ in donations for the 2012/13 financial year. You expect to receive approximately the same amount in future years while you are full-time workers.

All payments are made voluntarily and are received on a monthly basis.

All donations you receive are paid to you because you do not receive a salary from the international organisation.

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997

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

Section 23(AG) 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 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."

You departed Australia with your spouse and children to live and work as a missionary in country A. You rent an apartment there. When completing the Australian Immigration outgoing passenger card you stated your reason for going overseas was as a missionary or pastor.

You have not returned to Australia since you left.

(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 were born in Australia

You have previously worked overseas for a short period

You were living in provided accommodation prior to your departure.

(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).

· You work for an international mission organisation

· You are renting an apartment in country A

· Your spouse and children are living with you

· Your children attend school in country A; and

· You will be in country A for more than a year

(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 not returned to Australia since you left.

(vi) Purpose of visits to or absences from Australia

You will be absent from Australia for at least 1 and at most 3 years under your commitment to the work and hope that your visa will be renewed for a further year.

Your absence is for the purpose of carrying out your 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

You have relatives and friends in Australia and your spouse and children live with you in country A.

Business or economic

You previously worked in Australia and have further employment prospects when you return.

Assets

· You have furniture and personal effects in storage and a joint bank account in Australia,

· You have a car, a joint bank account and a computer in Country A and

· .You do not own any property.

(vii) 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 do not own a home to return to in Australia.

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 some factors outlined above which indicate that you have ceased to be a resident of Australia.

Specifically:

· your family has accompanied you

· you have not returned to Australia since leaving

· you rent an apartment in county A and do not have a home to return to in Australia.

Other factors indicate you have maintained a continuity of association with Australia:

· you maintain your Australian citizenship and only have the relevant work visa for country A

· your history of residence is residing in Australia with at least one other short term of work in another country.

· your recent mode of life has been to live in accommodation provided by organisations you perform services for

· your family ties other than your immediate family are in Australia.

· Your personal effects and furniture are stored in Australia

· you do not and have not maintained a place of abode in any particular location, you stay with your family where your services are required.

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 periods.

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'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

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.

Australia is your country of origin and you are an Australian citizen. Your domicile of choice is Australia. You have been granted a visa to live and work in country A. Your domicile has not changed to country A as you have not taken steps to apply for citizenship or obtain a permanent resident's visa in country A.

Permanent place of abode

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.

IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode;

i. the intended and actual length of the taxpayer's stay in the overseas country;

ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

v. the duration and continuity of the taxpayer's presence in the overseas country; and

vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Consideration of these factors

· you intend to remain in country A for a minimum of 1 year

· you intend returning to Australia to live

· are renting an apartment in country A

· prior to moving to country A you lived in missionary accommodation provided by your church

· you have not returned to Australia since you have been in country A and

· your children attend school in country A.

The Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. You are a resident of Australia under the domicile test.

183 day test

Where 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.

As you will not be in Australia for a period of 183 days during the relevant income year you are not a resident under the 183 day test.

Super test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person.  To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You and your spouse were locally engaged staff some time ago but did not pay into any super, therefore, you are not a resident under the Super test.

Donations

A gift received by a church worker is assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) if it is income in the ordinary sense of that word. 

Paragraph 26(e) of the ITAA 1936 provides that a taxpayers assessable income includes the value to the taxpayer of all allowances, gratuities, compensations, benefits, bonuses and premiums which are allowed, given or granted to the taxpayer in respect of, for or in relation (directly or indirectly) to any employment of or services rendered by the taxpayer. 

You stated that you will not receive the donations from family and friends when you cease work as a full-time volunteer. Therefore the donations you receive from family and friends relate to the services you render to the mission organisation, and are assessable under paragraph 26(e) of the ITAA 1936.  

Taxation Ruling IT 2674 explains that whether a gift to a minister of religion is assessable income depends on the quality or the character of the gift in the hands of the recipient. Consideration is necessary of the whole of the circumstances in which the gift is received. For example, the following factors need to be taken into account: 

(a) how, in what capacity, and for what reason the recipient received the gift

(b) whether the gift is of a kind which is a common incident of the recipients calling or occupation

(c) whether the gift is made voluntarily

(d) whether the gift is solicited

(e) if the gift can be traced to gratitude engendered by some service rendered by the recipient to the donor, whether the recipient had already been remunerated fully for that service

(f) the motive of the donor (but it is seldom, if ever, decisive), and

(g)   whether the recipient relies on the gift for regular maintenance of himself or herself and any dependents. 

A voluntary payment or gift which is properly characterised in the hands of the recipient as a product or incident of employment or a reward for services is assessable income, even if paid by a third party. Further, a frequent characteristic of income receipts is an element of periodicity, recurrence or regularity, even if the receipts are not directly attributable to employment or services rendered. A gift or donation received in these circumstances is assessable income even if the donor is not legally obliged to make the gift.  

Paragraph 14 of IT 2674 states that gifts are often made to church workers both as an expression of goodwill towards them personally and also as a reward for some income-producing activity of the church worker or in recognition of the church workers calling or occupation. If a substantial reason it does not have to be the dominant reason a gift is received by a church worker is his or her occupation or some income-producing activity on his or her part, the gift is income, even though the gift is also received on personal grounds. 

Paragraph 36 of IT 2674 provides an example where a church worker receives unsolicited donations of money and gifts in kind, when he addresses a gathering of worshippers. These gifts were received because those attending were spiritually moved to make these gifts. The church worker was not in any way motivated by the prospect of receiving gifts. Rather, he was motivated only by the genuine commitment to his religious beliefs. In this case the gifts were assessable income. 

In your case the unsolicited donations you receive can be seen to have an element of recurrence and regularity and are made in recognition of your calling as a volunteer missionary. While you are not employed by your employer, you perform services on a full-time basis. You rely on donations to support your family. You will not receive the donations from your supporters when you cease providing your services as a full-time volunteer for your employer. 

Accordingly, the donations that you receive are assessable.

Conclusion

You are a resident of Australia for tax purposes under the resides test and the domicile tests for the relevant periods.

As you are a resident you are required to lodge a tax return for the income years, and the money you receive for your work as a missionary is assessable.

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