Edited version of private advice

Authorisation Number: 1012628686179

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Ruling

Subject: Residency

Question and answer:

Were you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2009

Year ending 30 June 2010

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

The scheme commences on:

1 July 2008

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 a citizen of Australia.

You are divorced with no dependants.

You are a carer.

As a consequence of being employed as an carer you are required to live with your employer's and their families. This meant that you were required to travel overseas to different countries for various periods for the years included in this ruling.

After a number of years you returned to Australia.

Your employer's provided you with entry visa's for each of the countries that you were employed in.

The reason why you travelled to each of these countries was specifically for work purposes.

You lodged income tax returns to the country Z authorities while you were employed in the country Z.

You do not possess any assets overseas.

Your assets in Australia consist of a rental property and bank account to service your home loan.

During the period that you travelled overseas, your personal and household items were stored in Australia at a family member's storage facility.

You received Australian sourced income through your rental property, however this property is running at a large loss.

A portion of your foreign employment income was transferred to Australia to service your Australian mortgage.

You did not have any social or sporting ties with Australia or any of the countries that you were employed in.

You did not have PSS or CSS superannuation fund.

You are unsure whether you advised the Australian Electoral Commission to remove your name from the electoral roll.

You did not have any private health insurance and did not use Medicare while employed overseas.

Your intension was to remain overseas for as long as you were employed.

You returned to Australia permanently after being employed for a number of years.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

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

In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; (2002) 51 ATR 1173 at paragraph 43-44, it was determined that the word 'resides' should be given the widest meaning.

 Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia, identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes.

According to paragraph 20 of TR 98/17 factors to be considered in determining residency in Australia are:

•  intention or purpose of presence;

•  family and business/employment ties;

• maintenance and location of assets; and

•  social and living arrangements.

Paragraph 21 of TR 98/17 further states that:

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Recent case law decisions have expanded on the list of factors identified in TR 98/17.  Case 5/2013 and Sneddon v FC of T (Sneddons Case), for example, considered the following factors in relation to whether the taxpayer resided in Australia:

(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.  

Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1).

(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.

In your case, you have travelled to a number of destinations around the world for varying periods. Although you spent the majority of this time overseas and only returned to Australia for a short period, 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 Australia and are a citizen of Australia. While were overseas you were provided with entry visas for each of the countries you were employed in by your employers .

(iii) History of residence and movements

Your history of residence indicates that for some years you have worked overseas extensively.

(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 everyday living expenses and some furniture and household items that he purchased to make the fully-furnished apartment, provided by his employer more comfortable. Further his employment income was paid in Australian dollars into an Australian bank account and predominantly used to meet his Australian obligations.

Your case is simular with the taxpayer in Sneddon's Case. Your employers have provided you with live-in accommodation in all of the countries that you have been employed in. In addition, part of your overseas remuneration was transferred to Australia in order to meet your mortgage obligations.

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

For the years included in this ruling you only spent a brief period in Australia..

(vi) Purpose of visits to or absences from Australia

The purpose of your absence from Australia was employment. The purpose of your visit to Australia was for a holiday and to plan your permanent return to Australia.

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

Family

You are divorced with no dependants. You do however have family in Australia.

Business or economic

As discussed above, you received employment income while being employed in a number of countries for a number years. While in Australia, you received rental income from your investment property.

Assets

Your assets in Australia comprise of your investment property and a bank account.

You do not have any overseas assets.

(viii) Maintenance of Place of abode

While you were employed overseas your unit was used as a rental property.

Conclusion

It is acknowledged that your presence in Australia was only for brief a period. However 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 remained a citizen of Australia. Your ties in terms of family and material assets are far more substantial in Australia than in any of the overseas countries that you were employed in. You lived in employer provided accommodation and your overseas salary was transferred to Australia in part to service your Australian mortgage. Further it was your intension to remain overseas only as long as you were employed.

In consideration of all of the factors outlined above, it is concluded that you maintained a continuity of association with Australia and therefore continued to be a resident of Australia for income tax purposes under the 'resides test' for the years 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, and therefore your domicile of origin is Australia. From the information that you have provided you did not indicated any intention of becoming a citizen or permanent resident of any of the countries that you were employed in, therefore your Australian domicile remained 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 were employed in a number of countries for varying periods;

• you intended to live overseas for only as long as you were employed;

• when you departed Australia the reason for departure you put on your outgoing immigration card was 'employment';

• due to the nature of your employment you lived with your employers and their families while overseas;

• you did not have any assets overseas;

• your assets in Australia consisted of a rental property and a bank account;

• your personal and household items remained in storage in Australia; and

• you did not inform any Australian Government Agencies (Medicare etc.) that you were departing Australia indefinitely.

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 your intension was to remain overseas for only as long as you were employed. You did not inform any government agencies that you intended to live overseas indefinitely and your assets are far more significant in Australia than overseas. For the years included in this ruling you moved from one country to the next, depending on the where your employment opportunities were located. The period that you spent in each country varied from brief to extended periods. Further during this period you stayed in live-in accommodation with your employers and their families.

Therefore, based on the above the Commissioner is not satisfied that you had established a permanent place of abode outside of Australia.

Accordingly, as your Australian domicile remained unchanged and the Commissioner is not satisfied that you had established a permanent place of abode outside of Australia, you continued 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 continued 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 continued 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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