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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1012760202944

Ruling

Subject: Residency

Question and answer

Yes.

This ruling applies for the following periods

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on

1 July 2013

Relevant facts and circumstances

You are a citizen of Australian and also of a foreign country; where you were born.

You took up an appointment in a foreign country. You have supplied a copy of your employment contract.

The lease of an apartment was arranged for you to reside in during the three year term of your employment. You have supplied a copy of the lease agreement.

The lease shows both yours and your spouse's names. However, your spouse continues to live in the family home in Australia. Your spouse works full-time in Australia.

You returned to Australia to spend the holidays with your spouse. You departed Australia for a foreign country.

You intend returning to Australia again for one month's leave.

You and your spouse are still married. You are not legally separated or divorced.

Your spouse travelled to a foreign country to spend leave with you.

Your spouse will spend leave in a foreign country with you.

You will return to Australia and live in the family home when your overseas employment ceases.

Your assets in Australia are:

Your assets in a foreign country are:

Your social and sporting connections with Australia are.

Your social and sporting connections with a foreign country are:

You have not advised Medicare and/or health insurance provider to have your name removed from their records.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

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 first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

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 meet the conditions of one of the other three tests.

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:

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

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 several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically:

Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period.

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. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

In your case, you were born in a foreign country and moved to Australia and became a citizen of Australia also.

In your case, you were born in a foreign country and become a citizen of Australia when you were living here. Your domicile of origin is a foreign country and your domicile of choice became Australia. As you have departed Australia to live and work in a foreign country, you have reverted to your domicile of origin but will revert to your domicile of choice when you return to Australia.

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.

You own a home in Australia to which you will return periodically while living and working in a foreign country. You will return to it after your employment in a foreign country ceases. Your spouse will remain in your home throughout this period. While in a foreign country, you will live in rented accommodation.

You have not established a permanent place of abode in a foreign country as your presence there is temporary in nature. You cannot establish a permanent place of abode when your presence in a place is temporary.

The Commissioner is not satisfied you have a permanent place of abode outside of Australia.

Therefore, you will remain a resident of Australia under the domicile test.

As you have passed the resides (ordinary concepts) test and the domicile and permanent place of abode test, there is no need to consider the superannuation test and the 183-day test.

Your residency status

As you are a resident of Australia under two of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are considered to be an Australian resident for taxation purposes.

Duel residency

If a foreign country revenue authorities consider you to be a resident of that country you may be entitled to relief from double tax under the International Agreement with a foreign country.  

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