ATO Interpretative Decision

ATO ID 2001/401 (Withdrawn)

Income Tax

• This ATO ID is withdrawn. Guidance on the basis of the decision in this ATO ID can be found in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside of Australia. Guidance on the issue contained in this ATO ID can be found at www.ato.gov.au/residency, including the Determination of residency status - leaving Australia tool.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Does a Senior Government Official (such as a Commissioner, Consul General, Agent General or other Senior Office Holder) representing a Government of Australia (Commonwealth, State or Territory) in an overseas treaty country with Australia, for a period in excess of three (3) years, remain an Australian resident for taxation purposes?

Decision

Yes. The taxpayer, a Senior Official appointed to represent a Government of Australia, for a specified contract period in an overseas treaty country, remains an Australian resident for taxation purposes. The taxpayer qualifies as an Australian resident under subparagraph (a)(i) of the definition of 'resident' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

Facts

The taxpayer received an appointment, as a holder of a High Office, to represent a Government of Australia in an overseas treaty country with Australia for an agreed contract term, being in excess of three (3) years. Prior to accepting the appointment, the taxpayer had occupied a senior position in the public service. The taxpayer and family were authorised to enter and work in the overseas treaty country only for the duration of the employment contract; i.e., only whilst representing that Government of Australia.

The taxpayer entered into an employment contract with the Government employer in relation to this appointment. The terms and conditions of that employment contract are as follows:

•

the remuneration and benefits of the taxpayer whilst engaged overseas is determined by the relevant Public Service Acts;

•

the taxpayer is paid an overseas living allowance that will enable the family to live at an appropriate standard in the overseas treaty country;

•

the taxpayer is provided with a motor vehicle on a fully maintained basis for both official duties and personal use as well as a driver for official duties including travelling to and from work;

•

the taxpayer is provided with furnished accommodation appropriate to the posting at concessional rental rates;

•

the taxpayer is to remain a member of the employer's superannuation scheme;

•

the taxpayer's employer shall meet the costs of business class air fares for the taxpayer and immediate family members from the overseas post to Australia and return at least once per annum and other approved expenses;

•

upon expiration of the employment contract for overseas service, the taxpayer is to take up further employment at a senior level with a Government of Australia, in Australia, at the level of remuneration at which the taxpayer was employed immediately before taking up the overseas posting; and

•

the employment contract shall be governed by and shall be construed and interpreted in accordance with the laws of Australia.

The family home in Australia was rented during the period of overseas absence.

The taxpayer maintains assets in Australia, including the rented home, bank accounts and other small investments.

The taxpayer maintains a bank account, in the overseas country.

Reasons for Decision

An Australian resident is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes 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:

(1)

residence according to ordinary concepts (primary test)

(2)

domicile and permanent place of abode test (first statutory test)

(3)

183 day rule (second statutory test)

(4)

Commonwealth superannuation test (third statutory test)

The first two tests are the most applicable in deciding whether a person remains an Australian resident for taxation purposes in the case where the person leaves Australia temporarily and is not actually living in Australia during the year of income.

In the present case, the taxpayer does not qualify as an Australian resident for taxation purposes under ordinary concepts as the taxpayer is not actually living in Australia during the period of appointment in the overseas country.

However, under the domicile and permanent place of abode test, a person will be a resident of Australia if he or she has an Australian domicile, unless the Commissioner of Taxation is satisfied that the person has established a permanent place of abode outside of Australia.

Taxation Ruling IT 2650 states at paragraph 10 that, 'In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1), it is necessary to consider the person's intention as to the county in which he or she intends to make his or her home indefinitely.'

The taxpayer will retain an Australian domicile as, under the employment contract, the taxpayer is to return to Australia at the end of the overseas appointment.

Where the taxpayer's domicile is in Australia, it is necessary to consider whether or not the taxpayer has established a permanent place of abode outside of Australia.

The leading case on whether a permanent place of abode is outside Australia is FC of T v. Applegate 79 ATC 4307; (1979) 9 ATR 899. The Federal Court said that in respect of the definition of 'resident', a permanent place of abode does not have to be everlasting or forever.

Taxation Ruling IT 2650, sets out the factors that are used to determine a taxpayer's permanent place of abode. These are summarised at paragraph 5 in the Ruling as:

(a)

the intended and actual length of the taxpayer's stay in the overseas country;

(b)

any intention either to return to Australia at some definite point in time or to travel to another country;

(c)

the establishment of a home outside Australia;

(d)

the abandonment of any residence or place of abode the individual may have had in Australia;

(e)

the duration and continuity of the taxpayer's presence in the overseas country; and

(f)

the durability of association that the individual has with a particular place in Australia.

The taxpayer's appointment in the overseas country is for a period in excess of 3 years. However, the Senior representative position held by the taxpayer in the overseas country, and the relationship this position has with a Government of Australia, show that the taxpayer continues to have strong ties to Australia in respect of the overseas appointment.

This is evidenced in the taxpayer's economic and employment ties to Australia, in particular, with regard to:

•

the taxpayer's representative role;

•

the fact that the taxpayer's remuneration is paid by the Australian employer;

•

the taxpayer has an agreement with this employer to return to Australia to take up further employment duties, at the conclusion of the overseas appointment; and

•

the taxpayer has assets in Australia, including a home which is rented, bank accounts and a small investment,

By comparison the taxpayer only has a bank account in the overseas country.

The taxpayer has not demonstrated that a permanent place of abode has been established in the overseas country. Accordingly, the taxpayer remains an Australian resident for tax purposes under subparagraph (a)(i) of the definition of "resident" in subsection 6(1) of the ITAA 1936.

Legislative References:
Income Tax Assessment Act 1936
   subsection 6(1)
   subparagraph 6(1)(a)(i)

Case References:
FC of T v. Applegate
   79 ATC 4307
   (1979) 9 ATR 899

Related Public Rulings (including Determinations)
IT 2650

Keywords
Residence in Australia
Residence of individuals
Domicile and permanent place of abode test
Precedent
Resident/residency
Statutory test
Agent General
Consul General
Senior Government Officials

Business Line:  Small Business/Individual Taxpayers

Date of publication:  29 September 2001
Date reviewed:  17 January 2014

ISSN: 1445-2782