Edited version of private advice

Authorisation Number: 1051647843615

Date of advice: 15 April 2020

Ruling

Subject: Residency of Australia for taxation purposes

Question

Are you a resident of Australia for income tax purposes?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 2020

Year ending 30 June 2021

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You have been working for an overseas company for several years.

You have been residing in Country X since the late 20XX.

You have been offered another project in Country Z where you will be a full Country Z resident, residing there on a visa.

The visa covers both yourself and your family.

You have a spouse and child in Australia.

You return to Australia no more than a few times a year.

Your spouse and child have not been to visit you whilst you have been residing overseas.

All your accommodation is supplied by the company.

Due to your new contract you will be posted to a camp in Country Z. The camp is remote and some distance from any residential area.

Your child will be leaving to live in Country Y in 20XX.

You spouse does not currently have a date of departure.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

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 reside test

·         the domicile and permanent place of abode 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 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.

The resides test

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'.

As you were working outside Australia for the majority of the financial year, you are not considered to be residing in Australia under this test.

However, even if a person is found not to 'reside' in Australia within the ordinary meaning of the word, he or she may still fall within the extended definition of 'resident'.

The domicile test

Under the domicile test, a person will be considered an Australian resident if they are considered to have their domicile in Australia, unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

Generally, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established they have acquired a different domicile of choice or by operation of law.

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make their home indefinitely in that country.

In your case, you have been working for Company Z for a number of years and have been residing in Country X since late 20XX.

Your family did not accompany you to Country X to live and have not visited you in the country.

You have periodically returned to Australia.

You have not procured your own dwelling outside of Australia other than that which is provided by your employer and will be living in a camp when the new project begins.

You are not considered to have made a home indefinitely overseas and your domicile continues to be Australia due to your significant family ties in 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.

Taxation Ruling IT 2650 provides guidelines for determining whether an individual leaving Australia temporarily has established a permanent place of abode overseas. The Ruling explains that a permanent place of abode does not have to be everlasting or forever, where it does not have to be where a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

Paragraph 23 of IT 2650 further explains that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. Rather, it is a question of fact to be determined in the light of all the circumstances of each case.

Some of the factors which have been considered relevant by the Courts and Boards of Review/Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

(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 the case of Mayhew v FCT [2013] AATA 130 (Mayhew), Mayhew's wife remained in Australia for approximately a year after he left the country while she finished her own employment contract although she moved out of their primary residence when he moved overseas.

While Mayhew had initially had accommodation supplied by his employer he found his own apartment within 2-3 months and his wife travelled overseas to visit him and help furnish the apartment.

Mayhew only visited Australia twice during the year in question, both were work related. Also Mayhew was not an Australian citizen, originally being from the UK before immigrating to New Zealand.

In Mayhew's case there was a clear intention for his wife to leave the country within a certain time period and take up resident overseas whereas your wife has remained here for a period of years and currently doesn't have a date of departure.

In contrast, you have been overseas for several years but your spouse and child have continued to live in Australia.

You have been living in accommodation provided by your employer and will continue to do so when you begin work on another project, and while there a practicable reasons for the situation you are living in, it is to some extent a choice as the visa covers both yourself and your family so you have the option of living there and setting up a home for your family but have chosen maintain a place of abode and domicile in Australia.

Based on these facts, you have not established a permanent place of abode outside Australia and retain a strong connection to Australia. As a result, you are a resident of Australia for income tax purposes under the domicile and permanent place of abode test.

183 day test and the Superannuation test

It is not necessary to consider these two tests in your circumstances as you are deemed to be a resident of Australia for income taxation purposes under the domicile and permanent place of abode test for the financial year ended 30 June 2020.

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