Edited version of your written advice

Authorisation Number: 1051253015561

Date of advice: 26 July 2017

Ruling

Subject: Residency

Question 1

Are you an Australian resident for income tax purposes for the financial year ended 30 June 20XX?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia.

You and your spouse married on Month A 20XX.

You spouse is a citizen of country A and has family in country A.

After you married your spouse, you began living in country A and were issued temporary residency in Month B 20XX.

Your temporary residency became a permanent one in 20XX.

You left Australia on Month C 20XX to visit country A and to see your fiancé at the time and now spouse.

You previously lived with your spouse in country A under a long term tenancy in their name. You spouse had exclusive possession of this property.

Your spouse has now purchased a home through a trust in country A.

You do not own or lease any property in country A in your own name.

Your spouse accepted a promotion at an office in country A. This job has a mandatory retirement age of X years old. You spouse is currently X years old.

Your family, including brothers, sisters, adult children and a young grandchild all live in Australia.

You own a unit in Australia. This property is leased.

You previously rented a house where you stayed in when in Australia.

You now stay with your sibling when in Australia. A part of this home is exclusively for your use 365 days per year.

You are the sole shareholder and director of an Australian company carrying on a business in Australia.

All of the business’s clients are located in Australia.

Due to the nature of your work, you are able to do most of your work regardless of where your location is.

You return to Australia at least four times per year to visit your company’s clients’ offices for quarterly scheduled maintenance. These visits are sufficient to visit family and friends. Your spouse accompanies you to Australia by taking time off using annual leave.

You maintain both country A and Australian bank account.

You are the sole member of a self-managed superannuation fund in Australia.

All your assets are in Australia with the exception of a motor vehicle you purchased in country A.

You are not a member of the Commonwealth superannuation scheme. Your spouse is also not a member of the Commonwealth superannuation scheme.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1),

Income Tax Assessment Act 1997 subsection 995-1(1) and

Domicile Act 1982 section 10.

Reasons for decision

Summary

You are an Australian resident for tax purposes for the financial year ended 30 June 20XX.

Detailed reasoning

Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purpose of the 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 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. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.

You are not residing in Australia according to the ordinary meaning of the word because you have been living in country A in addition to living in Australia and are not considered to be dwelling in Australia for a considerable period of time.

The domicile test

Section 10 of the Domicile Act 1982 provides that “the intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

In order to be deemed an Australian resident, the Commissioner has to be satisfied that your “permanent place of abode” is not outside Australia. “Place of abode” refers to your dwelling place or the physical surroundings in which you live (R v Hammond (1852) 117 E.R. 1477 at p. 1488). Paragraph 23 of Taxation Ruling IT 2650 Income tax: residency- permanent place of abode outside Australia (Taxation Ruling IT 2650) emphasises that the following factors are relevant in determining whether a taxpayer has established a permanent place of abode:

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

(b) any intention to stay in the overseas country temporarily and then move on to another country or to return to Australia at some definite point in time;

(c) the establishment of a home 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 individual maintains with a particular place in Australia.

In applying factor (a) to your circumstances, you have been living in country A since Month A 20XX which is a reasonably substantial period of time. This factor points towards you being a non-resident of Australia for tax purposes.

In applying factor (b), you have stated that you intend to return to Australia once your spouse retires. This could be anytime from now until the next nine years. There is no definite point in time you will be returning to Australia because it could happen anytime within the next nine years depending on when your spouse retires. This points towards you being a non-resident of Australia for tax purposes.

In applying factor (c), you and your spouse live in a house in country A. Since you have established a home, this points towards you being a non-resident of Australia for tax purposes.

In applying factor (d), you have a place of abode in Australia because you live in your sibling’s home in Australia and you have exclusive use of part of this home throughout the year. This points towards you being a resident of Australia for tax purposes.

In applying factor (e), the duration of your stay was discussed in factor (a) and there is no continuity in your stay because you return to Australia four times per year. This points towards you being a resident of Australia for tax purposes.

In applying factor (f), your ties to Country A include family ties because your spouse is living there. You hold a permanent green card. You also have a bank account and car in Country A. However, your spouse accompanies you to Australia whenever your spouse is able to use annual leave. Your ties to Australia are even stronger whenever your spouse accompanies you to Australia.

Your ties to Australia include your family ties through your brothers, sisters, adult children and a grandchild. You own a rental property in Australia, an Australian bank account and all other assets besides a car are held in Australia. You are the sole member of an Australian self-managed superannuation fund. You are also the sole shareholder and director of an Australian business.

Your ties to Australia are stronger than your ties to country A because even though your spouse is in country A, you also have numerous family members in Australia. You also own more substantial assets and almost all your assets are in Australia. You have additional ties to Australia through being the sole director of an Australian company. Factor (f) points towards you being an Australian resident for tax purposes.

Paragraph 24 of Taxation Ruling IT 2650 states that while no single factor will be decisive, factors (c), (e) and (f) seem to hold the greatest weight. Additionally, ZKBN and Commissioner of Taxation [2013] AATA 604 provides authority that retaining ties with Australia and having an intention to return to Australia greatly point towards Australian tax residency.

Even though factors (a), (b) and (d) as well as a factor carrying great weight- factor (c) point towards you being a non-resident of Australia, factor (d) and the two factors which carry great weight- factors (e) and (f) show that you have not sufficiently cut your connection with Australia. You are deemed to be an Australian resident for tax purposes.

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