Edited version of your written advice

Authorisation Number: 1051428558708

Date of advice: 14 September 2018

Ruling

Subject: Residency and travel expenses

Question 1

Are you a resident for taxation purposes from your arrival in Australia to your departure to Country Y?

Answer

Yes

Question 2

Are you a resident for taxation purposes from your departure to Country Y to your arrival back in Australia?

Answer

No

Question 3

Are you a resident for taxation purposes from your arrival back in Australia?

Answer

Yes

Question 4

Are the travel expenses you incurred during your time in Country Y deductible?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

Year ended 30 June 2019

The scheme commences on:

1 July 2016

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 are a citizen of Country X

You arrived in Australia in autumn 2016.

You came on a temporary 457 work visa that was sponsored by your Australian employer.

You were accompanied by your family. This consisted of your spouse and newly born child.

You lived in rented accommodation while in Australia.

Your Australian assets consisted of bank accounts and Australian shares.

You went to work for Employer X on a temporary assignment to Country Y for project implementation work in 2017.

You were still paid by your first Australian employer during this time. Your Country Y employer pays your first Australian employer who then pays you.

You left Australia in summer 2016.

You went to Country Z for family after this then to Country Y to start your role.

Your family joined you in Country Y.

You lived in a rented apartment while in Country Y. This was paid for by yourself.

You kept your household effects from Australia while in Country Y as it was your intention to return to Australia

You attempted to return to Australia in spring 2017 however you were denied boarding as your Visa had become void.

You extended your assignment in Country Y due to the Visa issues.

You incurred tax in Country Y as you were considered a resident for taxation purposes in Country Y during the relevant year.

You did not earn any other income while you were in Country Y besides your employment income.

You incurred travel expenses including rent and food during your time in Country Y

You were able to return to Australia with your family in autumn 2018.

You have secured long term tenancy agreement upon your return to Australia.

You intend to apply for permanent residency in the future. You have not taken any steps to obtain permanent residency during before you applied for the ruling.

You intention is to live and work in Australia permanently.

You maintained your Australian health insurance while in Country Y.

You are not a member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS)

Your spouse is not a member of the PSS or CSS

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Detailed reasoning

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident 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 resides test,

● The domicile test,

● The 183 day test, and

● 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 resides.

However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

First arrival in Australia

Resides 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.

The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year:

● Physical presence in Australia;

● Nationality;

● History of residence and movements;

● Habits and ‘mode of life’

● Frequency, regularity and duration of visits to Australia;

● Purpose of visits to or absences from Australia;

● Family and business ties with Australia compare to the foreign country concerned; and

● Maintenance of a place of abode.

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.

You moved to Australia with your family for employment. Your intention was to stay here permanently though you did not take steps to become a permanent resident during this period. You obtained Australian assets. You did not have another home overseas.

In your circumstances, your family and social ties are with Australia. It is considered that from the time you arrived in Australia in autumn 2016 until you left for Country Y in summer 2016 that you were a resident for taxation purposes under this test.

Departure to Singapore and arrival back to Australia

Resides Test

You left for Country Y in summer 2016 for a temporary work assignment. You family went with you. You do not have a home back in Australia as you lived in rental accommodation while you were there. You lived in a rented apartment while you were in Country Y. The only ties you had back to Australia where your Australian savings accounts and Australian shares.

You are not a resident for taxation purposes under this test.

The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

“Domicile” is a legal concept to be determined according to the Domicile Act 1982 and common law rules.

A person’s domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you were born in Country X and your domicile of origin is Country X. You came to Australia with the intention of living there permanently. You came to Australian on a temporary 457 Visa. Your family joined you on this trip. You did not take any steps to obtain permanent residency. You did not buy property in Australia; you only stayed in rented accommodation.

Based on the facts, you have not made Australia your domicile of choice. Therefore you are not a resident for taxation purposes under this test.

183 day test

You were not in Australia for more than 183 days in this relevant period. Therefore you do not satisfy this test.

The superannuation test

You and your spouse are not eligible to contribute to the PSS or CSS Commonwealth Super Funds. Therefore you are not a resident under this test.

Your residency status during this period

You do not satisfy any of the tests of residency during this period. Therefore you will be considered a non-resident from your date of departure to Country X until you arrived back into Australia.

Arrival back into Australia

Using the same arguments from when you first arrived into Australia, you will be considered to be a resident for taxation purposes under the resides test from your arrival back into Australia.

Travel expenses

Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature, or relates to the earning of exempt income.

You incurred travel expenses during your time in Country Y. Based on the determination above, you were a non-resident for taxation purposes during your time in this country. Accordingly your employment income earned while in Singapore is non-assessable in Australia as the source of your income would be in Country Y. Therefore you cannot claim any deductions against this income.

Alternatively, if you were an Australian resident during this period, you would still not be able to claim travel expenses.

In general, accommodation and food expenses are considered private expenses and consequently are not deductible. However these sorts of expenditure are deductible where the employee is travelling in performing their work and not living away from home (Taxation Ruling TR 2017/D6).

You undertook a temporary job in Country Y with your employer. Your expenses were not occurred in travelling in the course of your employment. It was preliminary to your employment. You and your family relocated to Country Y for the role. This role was for an extended period of time, even disregarding the extension you received after the Visa issues.

You will be considered to have relocated to Country Y for your job. Accordingly your travel expenses would not be deductible.

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