Edited version of your private ruling

Authorisation Number: 1012609794238

Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commences on:

19 September 2013

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 Australia and are an Australian citizen.

You have no dependants and have recently separated from your partner.

You moved to Country D to take up a short term employment assignment for a company based in Country D.

After a period, you were offered and accepted a permanent position in Country D.

You entered Country D on a 12 month visa - with multiple entries, work permit application and stay permit.

After 12 months your visa will be required to be renewed every 6 months.

Your visa/permit is provided to you by your employer.

Your employment contract in Country D contains the following provisions;

The employee will reside in Country D and work a number of days -site followed by a number of days off-site roster on a drive-in/drive-out basis. Drive-in and drive-out of site will form part of your work roster.

While you are on-site, a room and all meals will be provided. Transport to and from site will be provided by the company.

Country D currently imposes personal income tax of 10% of the Total Compensation Package

Allowances

In addition you will receive a monthly allowance towards furnished accommodation in X.

Annual Leave Airfares

Your employer will meet the cost of economy class airfares and accommodation (if applicable) for flights back to your nominated residence in Australia, twice a year for you.

On arrival in Country D you lived in an employer provided serviced apartment.

After a period, you moved out of your employer provided accommodation into an apartment that you are now leasing and have sole use of for the days that you are not working on site as per your roster.

In the short term, you plan to return to Australia on a number of occasions for personal and academic reasons.

In the long term, you intend to utilise the return flights to Australia that you receive annually as provided for under the provisions of your contract.

Prior to leaving Australia you lived in your own home. This home is currently on the market to be sold.

Your ex-partner will continue to live in your home in Australia until the house is sold or nearing sale. If it is not sold they will move out in a number of months.

Your assets in Australia consist of your home (currently on the market to be sold), a bank account, a small parcel of shares and some household effects.

Your overseas assets consist of a bank account, household and personal effects. You also intend to purchase a motor cycle.

A portion of your foreign sourced income is being transferred to your Australian bank account to service your mortgage until your home is disposed of.

You do not have any social or sporting ties with Australia.

Your social and sporting ties with Country D consist of friends and colleagues.

You do not have an employment position or job being held for you in Australia.

You have advised Medicare, your private health insurer, the Australian Electoral Commission, your bank and the financial institution that manages your shares that you have ceased being a resident of Australia for tax purposes.

You have never been a Commonwealth Government of Australia employee or been eligible to contribute the PSS or CSS.

You have not lodged tax returns in Country D as this is not required.

You have stated 'employment' as the reason for your departure from Australia on your immigration outgoing passenger.

You intend to reside in Country D indefinitely. You formed this intention to after being offered a permanent employment position in Country D.

Assumption(s)

Nil

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Further issues for you to consider

Nil

Anti-avoidance rules

Nil

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 resides test

• the domicile test

• the 183 day test

• the superannuation test.

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

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

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, in the short term you intend to return to Australia on a number of occasions for academic and personal reasons for short periods. Further you intend to utilise the provision in your employment contract which include return flights to Australia annually.

(ii) Nationality

You were born in Australia and are a citizen of Australia. While living and working in Country D you are supplied by your employer a renewable Visa that allows you to live and work in Country D.

(iii) History of residence and movements

You were born in Australia where you lived and were employed. You moved to Country D to live and work after receiving an offer of employment. It is your intention to live in Country D for an indefinite period.

(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.

While employed in Country D the conditions of your employment are such that you are on a roster that requires you to work a number of days on site followed by a number of days off. While you are on site your employer supplies you with travel to and from the site, a room and all meals. With regards to the days that you have off, your employer provided you with a serviced apartment until you could find your own lodgings. After a period you found a fully furnished apartment to lease and subsequently moved out of the serviced apartment. Your employment contract contains the provision for an allowance towards furnished accommodation in Country D.

Therefore for approximately 70% of the time that you are living in Country D your employer directly provides you with accommodation, meals etc. and for the remaining 30% your employer indirectly provides you with accommodation through the payment of an allowance.

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

As discussed above, you intend to return to Australia on a number of occasions for brief periods for various reasons. Contained within your employment contract is the provision of annual return airfares to Australia which you intend to utilise.

(vi)  Purpose of visits to or absences from Australia

You have stated 'employment' as the reason for your departure from Australia on your immigration outgoing passenger. You visits to Australia will be for academic and personal reasons.

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

Family

Although you have separated from your partner and have no dependants your family still resides in Australia. In Country D you do not have any family ties.

Business or economic

As mentioned above, you have accepted a permanent employment position in Country D for an indefinite period.

Assets

Your assets in Australia comprise of a home that you are in the process of disposing of, some personal effects and a small parcel of shares.

Your assets in Country D consist of some household effects and a bank account. In addition you intend to purchase a motor cycle.

(viii) Maintenance of Place of abode

You are in the process of disposing of your home in Australia.

Conclusion

It is acknowledged that your presence in Australia will be for brief periods, you are disposing of your home in Australia and that you will not be maintaining a place of abode in Australia once your home is disposed of.

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 will return to Australia on a number of occasions per a year through your contract provision of return fights to Australia annually. Your employer directly supplies you with your accommodation through the provision of a room, meals etc. for the period that you are working on site. Your employer also indirectly provides you with accommodation during the days off that you are not at the site through an accommodation allowance. You have stated employment as the reason for your departure on your immigration outgoing passenger card and have remained a citizen of Australia. Further you are living and working in Country D under an employer provided visa. Your ties in terms of family are far more substantial in Australia than in Country D.

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.

Whilst is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you 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 prove an intention to make his or her home indefinitely in that country. In your case you were born in Australia, therefore you're domicile of origin is Australia. You have moved to Country D after receiving an offer of employment and are provided with a visa from your employer that allows you to live and work in Country D. As you have not demonstrated any intention of becoming a citizen or permanent resident of Country D 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:

a) the intended and actual length of the taxpayer's stay in the overseas country;

b) 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;

c) 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;

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

e) the duration and continuity of the taxpayer's presence in the overseas country; and

f) the 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.

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

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

Your circumstances are as follows:

• you moved to Country D to for the purpose of taking up a short term employment assignment;

• shortly after you accepted a permanent position from your employer;

• after receiving the permanent employment offer your intension is to live and work in the Country D for an indefinite period;

• conditions of employment are such that that you work on site for a number of days, followed by a number of days off;

• while you are on site your employer provides you with transportation, accommodation and all meals;

• on arrival in Country D you initially lived in an employer provided serviced apartment which was used for the days that you were not working on site, however shortly after you leased a fully furnished apartment;

• during the days that you have off you stay in your leased apartment;

• in addition to supplying you with accommodation while on site your employment contract contains the provision of a monthly allowance for your accommodation expenses;

• your assets in Australia consists of a home that you are in the process of disposing of, a bank account, a small parcel of shares and some personal items; and

• when you depart Australia the reason you put on your outgoing immigration card is employment.

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 living and working in Country D you live in accommodation that is directly supplied to you by your employer while working on site (70% of the time). In addition, during the days that you are not working (30% of the time), you live in a fully furnished apartment. This apartment is being indirectly paid for by your employer through the provision of an accommodation allowance, which is contained within your employment contract.

Based on this and other facts relating to your scheme, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia.

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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