Edited version of private advice

Authorisation Number: 1051723863057

Date of advice: 21 July 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2017

Year ended 30 June 2018

The scheme commenced on:

1 July 2016

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You are not a permanent resident of any other country.

You work in Country Y.

You have a work permit which allows you to work in country Y.

The permit is renewed annually.

You live in employer provided hotel style accommodation in a compound in Country Y.

You work X weeks on and X weeks off.

During your X weeks off you fly back to Australia to your home in Australia for X week.

You then fly to Country Z for XX days to spend time with your fiancée and child.

You rent accommodation in Country Z for your Fiancée and child to live in. you stay with them when you visit.

Your visa for Country Z is only for XX days and after this period you need to leave country Z.

You then return to Country Y to commence your next X -week rotation.

Neither you nor your spouse are currently or have ever been Commonwealth government employees.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

·        resides test

·        domicile and permanent place of abode test

·        183 day test and

·        Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

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:

(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 different countries

(viii)         Maintenance of 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 were born in Australia.

You are a citizen of Australia.

You are in Country Y for work purposes.

You return to your home in Australia every X weeks.

You then go to Country Z where you spend XX days with your fiancée and child.

You then return to Country Y to commence your work X -week rotation.

Based on the facts above you were residing in Australia according to ordinary concepts for the 2017 and 2018 financial years as you have maintained a continuity of association with Australia.

You have not abandoned your home in Australia and you regularly return to Australia.

You are a fly in fly out worker in Country Y.

Your connections with Australia are still very strong.

You are a resident of Australia under this test.

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 test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Australia.

You have not changed your domicile.

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 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.

The Commissioner is not satisfied that you set up a permanent place of abode outside Australia for the following reasons:

·        You maintain a home in Australia

·        You return to Australia every X weeks

·        You live in hotel style accommodation provided by your employer in a compound in Country Y

You are a resident under this test.

Your residency status

You were a resident of Australia for taxation purposes for the 2017 and 2018 financial years.

As a resident of Australia for taxation purposes you are required to declare all your income both in Australia and outside Australia in your Australian tax returns.

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