Edited version of private advice

Authorisation Number: 1012630774659

Ruling

Subject: Residency

Question and answer

Did you become a resident of Australia for tax purposes at the time your family relocated to Australia?

Yes.

This ruling applies for the following periods

Year ended 30 June 2013

Year ending 30 June 2014

The scheme commences on

1 July 2012

Relevant facts and circumstances

You were born in country X and are a citizen of country X.

You have a spouse and children (your family).

Prior to arriving in Australia in 20XX, you lived in country X and country Y, where you worked for a country Y company.

In 20XX, you came to Australia with your family for a work assignment after which you were to return to country Y.

You did not purchase any property in Australia at this time.

You and your family were granted permanent residency of Australia in 20XY.

Neither you nor your spouse became Australian citizens and have no plans to change your visa status.

Your assignment in Australia was cut short and you left Australia in 20XZ, making your stay in Australia less than 2 years.

In 20XZ, you and your family moved to country Z on a long-term assignment with the country Z company that was part of your employer's group of companies.

You placed some household items in storage when you left Australia.

You state that you became a non-resident of Australia for tax purposes when you left Australia.

You became tax residents of country Z upon arrival in that country.

You were granted residency of country Z which had to be renewed annually.

You and your family lived in a house that was leased directly by your employer and was for your sole use. The house was selected by you purely on your needs and was not mandated by the company.

An amount was deducted from your salary by your employer to pay for your accommodation and you contributed to the running costs and paid for all your food and other living expenses.

Your family decided to relocate to Australia and moved here in early in 20YY.

You and your spouse purchased a house in Australia for your family to live in.

After your family's relocation, you initially remained in the same house in country Z which contained your personal effects and other household items such as office/TV/fridge/furniture /linen.

After your family's relocation, you continued your regular routine and habits in country Z which included entertaining and socialising with friends and associates, dining out, going to movies, sightseeing, athletic activities and also travelling to country X to see other family.

After your family's relocation, part of your salary was spent by your spouse in Australia.

At the time of your family's relocation to Australia, you intended to remain in country Z on a long-term basis working for your employer, as well as pursuing other career opportunities in the region.

Later in 20YY, your employment contract ended and you immediately entered into a contract as a consultant to the same company which is still ongoing.

You declined job offers in Australia with your former employer in favour of establishing your own consulting practice based in country Z or elsewhere in the region.

You continued working in country Z under your existing work permit and residency. You later applied for a business visa which allowed you to work independently.

Later in 20YY, you made a decision that you would relocate to Australia and continue your consulting practice from your base in Australia and travel to country Z, as well as the broader region, when required.

You moved from your house in country Z into your employer's guest house which is provided to all consultants. Most of your household items were given away at this time.

You relocated to Australia permanently some eight months after your family had relocated here.

You state that your residency intentions have been tied to your career and you are prepared to live wherever you can find appropriate employment. This intention changed in later in 20YY when you decided that you could be based in Australia and travel to country Z to work.

During the period from when your family relocated to Australia, you made seven brief trips to Australia, mainly to assist your family with their relocation and move to the newly purchased property. Your family had belongings stored in country Y and elsewhere which were gradually moved to Australia. Your family required your assistance as you do not have any family in Australia.

You accompanied your family on their relocation to Australia and then made six return visits to Australia totalling approximately ten weeks.

While working in country Z, your salary was deposited into your Australian bank account, in accordance with the normal payroll practices of your employer. However, a significant amount of it was transferred to country Z (to cover your living expenses) and country X (to cover expenses relating to properties/assets held in the trust/company, maintaining your foreign life insurance as well as to support your mother in country X).

While living in country Z, you filed tax returns and paid taxes in country Y and country Z.

While living in country Z, you advised Australian financial institutions and companies with whom you have investments that you were a non-resident.

While living in country Z, you maintained your Medicare card and Australian private health insurance. The insurance, however, was a benefit provided by your employer to all of its employees. In addition, you were not aware that Medicare benefits were not available to you as a non-resident of Australia and your private health insurer insisted that you use the Medicare benefits.

You have maintained professional memberships in country X, country Y and another foreign country.

You maintained some economic ties with Australia (bank accounts, shares and investments in managed funds). You also have extensive investments in other countries, including country X and country Y. This includes various shareholdings, bank accounts, investments in private companies and interest in a foreign trust.

Neither you nor your spouse has ever worked for the Australian Commonwealth government.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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 (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.

In your situation, your family relocated to Australia in early 20YY and you relocated to Australia permanently eight months later (the relevant period). Therefore, it is necessary to decide at which time you became an Australian resident for taxation purposes.

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 court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that 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, it was stated 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 to Australia and the other country; 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.

To determine at what time you commenced 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 is not necessarily a non-resident because he or she is physically absent from Australia. Instead, the courts have established a general test that considers whether the person has retained a continuity of association with a 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).

As indicated in Iyengar v. Federal Commissioner of Taxation [2011] AATA 856; 2011 ATC 10-222, (Iyengar's case), there is usually a requirement that you be physically present in Australia for at least part of an income year to be considered a resident.

In your case, you accompanied your family when they relocated to Australia. You then made six return trips totalling some ten weeks, before relocating permanently to Australia later in 20YY.

Therefore, although you were not physically present in Australia for the majority of the relevant period this does not preclude you from being an Australian resident from when your family relocated to Australia.

(ii) Nationality

You were born in country X and are a citizen of country X.

You have been granted permanent residence in Australia.

(iii) History of residence and movements

You lived and worked in country X and country Y prior to relocating to Australia in 20XX for a new work assignment. You moved to country Z on a long-term work assignment in 20XZ and relocated permanently to Australia in 20YY.

(iv) Habits and 'mode of life'

In 20XX, you came to Australia with your family for an expected three year work assignment, and:

• you and your family were granted permanent residency of Australia in 20XY;

• neither you nor your spouse became Australian citizens;

• your work assignment in Australia was cut short and you left Australia in 20XZ, making your stay in Australia 18 months.

In 20XZ, you moved to country Z with your family on a long-term work assignment, and:

• you became tax residents of country Z upon arrival in that country;

• you were granted residency of country Z which had to be renewed annually;

• you and your family lived in a house that was leased directly by your employer and was for your sole use. The house was selected by you purely on your needs and was not mandated by the company;

• an amount was deducted from your salary by your employer to pay for your accommodation and you contributed to the running costs and paid for all your food and other living expenses.

Your family relocated to Australia in early 20YY, and:

• you accompanied your family when they relocated;

• you made six trips to Australia totalling some ten weeks during the relevant period,

• you initially remained in the same house in country Z which contained your personal effects and other household items such as office/TV/fridge/furniture /linen;

• you continued your regular routine and habits in country Z which included entertaining and socialising with friends and associates, dining out, going to movies, sightseeing, athletic activities and also travelling to country X to see other family;

• part of your salary was spent by your spouse in Australia;

• you intended to remain in country Z on a long-term basis working for your employer, as well as pursuing other career opportunities in the region;

• your employment contract ended later in 20YY and you immediately entered into a contract as a consultant to the same company which is still ongoing;

• you declined job offers in Australia with your former employer in favour of establishing your own consulting practice based in country Z;

• you continued working in country Z under your existing work permit and residency. You later applied for a business visa which allowed you to work independently;

• you made a decision that you would relocate to Australia and continue your consulting practice from your base in Australia and travel to country Z, as well as the broader region, when required;

• you moved from your house in country Z into your employer's guest house, which is provided to all consultants. Most of your household items were given away at this time;

After your family relocated to Australia, you generally maintained your normal work and lifestyle routine in country Z until you eventually relocated to Australia. However, a significant change in your routine was evident in the trips you made to Australia to visit your family, which indicated a continuing association with Australia during the relevant period.

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

In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that the mere fact that visits to a country are of short duration does not of itself exclude residence in that country.

The taxpayer in Case 5/2013 was considered a resident of Australia despite only being present in Australia five of the 52 weeks under consideration, as the Tribunal considered that his visits indicated that he retained a 'continuity of association' with Australia. Similarly, the taxpayer in Iyengar's case was found to be a resident even though he had only been present in Australia for two separate periods totalling two weeks and ten days during a period of two years and seven months.

As previously mentioned, you accompanied your family when they relocated to Australia. You then made six return trips totalling approximately ten weeks before you eventually relocated to Australia.

Your return visits to Australia to visit your family were a strong indication that you had a continuity of association with Australia during the relevant period.

(vii) Family and business ties

Family

Case law has shown that it may be more likely for an individual to be considered to be residing in Australia where the spouse and any dependent children of the individual reside in Australia during the individual's absence overseas. This factor is indicative of the individual having a continuity of association with Australia and examples can be found in Case 5/2013, Iyengar's case and Nordern v Federal Commissioner of Taxation [2013] AATA 271 (Nordern's case).

In your case, your spouse and children relocated to Australia in early 20YY which is a strong indication that you had a continuity of association with Australia prior to your eventual relocation.

Business or economic

After your family relocated to Australia, you continued to work for your employer in country Z until you eventually left the country. You also leased your own accommodation for the majority of this period. Your salary was paid into your Australian bank account and part of this income was utilised by your spouse in Australia.

Assets

Your assets in Australia included bank accounts, shares and investments in managed funds and household furniture. You also purchased a house in Australia.

Your assets in country Z included household furniture and effects and a vehicle which were eventually left in country Z or given away.

It is evident that you had stronger financial ties to Australia than country Z by way of your assets during the relevant period.

(viii) Maintenance of a place of abode in Australia

Case law has shown that it may be more likely for an individual to be considered to be residing in Australia where a place of residence is available for the individual and/or family members to live in. This factor is indicative of the individual having a continuity of association with Australia and examples can be found in Case 5/2013, Iyengar's case, Nordern's case, Pillay v Federal Commissioner of Taxation [2013] AATA 447; 2013 ATC 10-324 and Sneddon v Federal Commissioner of Taxation [2013] AATA 516; 2012 ATC 10-264.

In your case, you and your spouse purchased a house for your family to live in after your family relocated to Australia.

Therefore, it is evident that you had a residence available for you to stay in and that you were maintaining a place of abode in Australia prior to your relocation to Australia. This is a strong indication that you had a continuity of association with Australia prior to your eventual relocation.

Iyengar's case

In your application for a ruling, you have compared your situation to the taxpayer in Iyengar's case who was found to have a continuity of association with Australia and to be an Australian resident for tax purposes. During the relevant period, your circumstances were dissimilar to this taxpayer in that you did not have the intention of returning to Australia at the outset of your contract, did not have the motive of paying off a mortgage as quickly as possible and did not live in employer provided accommodation for the entire period spent overseas. However, your circumstances were similar to this taxpayer in that your family lived in the family home in Australia, you maintained a place of abode in Australia, you had a higher value of assets in Australia than the overseas country and you made return visits to Australia to visit your family (more visits over a shorter period of time in your case).

Although you retained an association with country Z during the relevant period, it is considered that on balance your association with Australia was stronger during this period, as evidenced by the following factors:

• your family was living in the family home in Australia;

• you owned and maintained a place of abode in Australia;

• you travelled to Australia when your family relocated here and returned another six times thereafter for a total period of approximately ten weeks; and

• had a higher value of assets in Australia than in country Z.

You maintained a continuity of association with Australia from when your family relocated to Australia. Therefore, you were residing in Australia according to the ordinary meaning of the word and were a resident under the 'resides' test of residency from when your family relocated to Australia.

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 and permanent place of abode test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a 'domicile of choice' in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982).

Section 12 of the Domicile Act 1982 specifies that the acquisition of a domicile of choice in place of a domicile of origin may be established by evidence that would be sufficient to establish the domicile of choice if the previous domicile had also been a domicile of choice. Consequently, this evidence could be demonstrated, for example, by way of obtaining a migration visa or by being granted permanent residency or citizenship of the relevant country.

In your case, you were born in country X and are a citizen of country X. You moved to Australia for employment purposes and were granted permanent residency.

An Australian 'permanent resident' is the name given to a non-citizen who is the holder of a permanent visa. A permanent resident can live and work without restriction in Australia. Anyone who wishes to enter Australia must satisfy the character requirement as set out in Section 501 of the Migration Act 1958. Visa holders must also continue to satisfy the character requirement. The Minister and the Department of Immigration and Border Protection have the power to cancel a visa on the basis that a person does not pass the character test. Apart from this aspect, the holder of a permanent visa generally has a permanent right to stay in Australia.

You acquired a domicile of choice in Australia at the time you were granted a permanent resident visa and therefore, Australia is still your domicile. You have not moved back to country X and the existence of family and assets in country X does not have a bearing on your domicile.

As your domicile is Australia, the 'permanent place of abode' test must now be considered.

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 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.

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

Paragraph 23 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) sets out the following factors which are taken into account in reaching a state of satisfaction as to an individual's permanent place of abode:

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

(b) any intention either to stay in the overseas country temporarily or to return to Australia at some definite point in time;

(c) whether the taxpayer has established a home (in the sense of a dwelling place, a house or 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;

(f) the durability of association the person has with a particular place in Australia, that is, maintaining bank accounts, place of education of the individual'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.

In your case, we note that there are several factors that indicate you may have had a permanent place of abode outside Australia after your family relocated to Australia, as evidenced by:

• you intended to continue living and working in country Z indefinitely;

• you only decided to relocate to Australia later in the year;

• you continued working for your existing employer in country Z;

• you continued your regular routine and habits in country Z; and

• you continued living in your existing furnished accommodation in country Z until just before you relocated to Australia.

However, the above factors are outweighed by the following factors that indicate that you did not have a permanent place of abode in country Z after your family relocated to Australia:

• you purchased a house in Australia for your family to live in and the house was available for you to stay in on your return visits to Australia;

• the continuity of your presence in country Z was interrupted by the return visits you made to Australia to visit your family; and

• you had a durable association with Australia as your family relocated here, your children commenced education here, you had assets here and you maintained bank accounts here and so on.

On balance, the Commissioner is not satisfied that you had a permanent place of abode outside Australia from the time your family relocated to Australia.

Therefore, you were a resident of Australia under the 'domicile and permanent place of abode' test of residency from that time.

Conclusion

As you meet the 'resides' and 'domicile and permanent place of abode' tests of residency, you will be a resident of Australia for tax purposes from the time your family relocated to Australia.

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