Edited version of your private ruling

Authorisation Number: 1012607641598

Ruling

Subject: residency

Questions and answers

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

Yes.

2. Is the income you derive from an international organisation as a short term consultant assessable in Australia?

Yes.

This ruling applies for the following periods

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commences on

1 July 2012

Relevant facts and circumstances

You were born in country Y and you are a citizen of both Country Y and Australia.

You and your spouse went overseas a number of years ago.

You have taken leave without pay from your Australian employer for the period you are overseas.

Your spouse is working for an international organisation overseas.

You have travelled with your spouse on a dependant's visa.

You do short term consultancy work for an International organisation.

You and your spouse lived and worked in Australia prior to going to overseas.

You have come back to Australia since leaving to visit family.

You and your spouse are renting an apartment in overseas.

You and your spouse own a property in Australia which is being rented out.

You left some of your household affects with family members and the remainder you took with you.

You derive income in Australia.

You have a number of assets in Australia.

You have a few assets overseas.

You and your spouse intend on returning to Australia to live.

You have registered as an overseas voter.

You believe that you put on the outgoing passenger card that you were accompanying spouse on posting.

You and your spouse are not eligible to contribute to the PSS or the CSS.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1997 Subsection 6-15(2)

Income Tax Assessment Act 1997 Subsection 6-20

Income Tax Assessment Act 1997 Section 995-1

International Organisation (Privileges and Immunities) Act 1963

Specialized Agencies (Privileges and Immunities) Regulations 1986

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 'resides' test;

• the 'domicile' and 'permanent place of abode' test;

• the 183 day test; and

• the Commonwealth superannuation fund test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation 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'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd 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 High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

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:

(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 with Australia compared to the foreign country concerned; and

(viii) Maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

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.

Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62):

Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1.

You accompanied your spouse overseas for work purposes.

You have returned to visit family for a few weeks since leaving Australia.

Although you will not be physically present in Australia while you and your spouse are living and working overseas, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above.

(ii) Nationality

You were born in country Y and you are a citizen of both Country Y and Australia.

(iii) History of residence and movements

You lived and worked in Australia prior to accompanying your spouse overseas.

(iv) Habits and 'mode of life'

You intend to be overseas for the duration of your spouse's employment.

You intend on returning to Australia to live in the future.

It is considered that you have a continuing association with Australia and is consistent with someone who is still residing in Australia.

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

You have returned to Australia to visit family since leaving.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia was to accompany your spouse on their posting with an international organisation.

(vii) Family, business and financial ties

Family

You accompanied your spouse overseas.

Business or economic

As mentioned above you have gone overseas with your spouse while they are working for an international organisation.

Assets

You have significantly more assets in Australia than overseas.

(viii) Maintenance of a place of abode in Australia

You are not maintaining a home in Australia while you are overseas.

Summary of the resides test

As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning.

In your case, although you intended to be physically absent from Australia, there are various factors that indicate that you did not ceased to be a resident of Australia. These are primarily:

• you are an Australian citizen;

• you live in rented accommodation overseas

• you intend on returning to Australia

Based on the above, you retained a continuity of association with Australia while you were overseas and were residing in Australia according to the ordinary meaning of the word.

Therefore, you are a resident of Australia under the 'resides' test of residency.

Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument.

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 country Y.

A domicile of choice is adopted when you become a citizen of a new country or apply for permanent residency in a new country.

You are a citizen of Australia and therefore your domicile of choice is Australia.

You have not changed your domicile since you have been overseas and have not indicated that you are going too.

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 intend on returning to Australia

• You live in rented accommodation overseas

• You have left some of your belongings in Australia

You are a resident under this test.

As you meet the resides and domicile tests of residency, you are a resident of Australia for tax purposes for the period you are in Country Y.

Short term consultancy work

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident will include ordinary income derived from all sources, whether in or out of Australia, during the income year.

Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income.

Section 6-20 of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law.

The International Organisations (Privileges & Immunities) Act 1963 (IO(P&I)A) is a Commonwealth law under which an international organisation, and persons engaged by it, may be accorded certain privileges and immunities including an exemption from tax.

Subparagraph 6(1)(e)(i) of the IO(P&I)A provides that the regulations may confer all or any of the privileges and immunities set out in Part I of the Fifth Schedule of the IO(P&I)A upon a person who serves on a committee, or, participates in the work of, or, performs a mission on behalf of, an international organisation to which this Act applies.

The organisation is listed in the Schedule to the Specialised Agencies (Privileges & Immunities) Regulations 1986 (SA(P&I) Regs). The SA(P&I) Regs are made under section 6 the IO(P&I)A.

Regulation 9 of the SA(P&I) Regs does not provide any income tax exemption for persons serving on a committee or performing a mission (such as independent consultants) for the World Bank.

In your case you received income as a result of a contract with international organisation to provide consultancy services. You are not an employee of the international organisation.

Therefore, the income you received as a consultant from the international organisation for the provision of services carried out overseas, is assessable under subsection 6-5(2) of the ITAA 1997.

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