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Ruling

Subject: Residency

Question and answer:

Are you an Australian resident for income tax purposes for the period 1 July 2009 to 30 June 2015?

No.

This ruling applies for the following period:

1 July 2009 to 30 June 2015.

The scheme commenced on:

1 July 2009.

Relevant facts:

You are a citizen of another country and your domicile is in another country.

You are a resident of another country for tax purposes.

You have business interests in Australia and another country.

Your children attend school in Australia. They have student visas.

Your children live in a home in Australia. You do not own this home.

When you are in Australia, you and your spouse also live in this home.

Until recently, your spouse was residing in Australia however, they have returned to another country to live with you in the family home because the visa allowing their entry to Australia has expired.

You are in the process of applying for a visa (the visa) which will:

o provide you with Australian permanent resident status for immigration purposes, and

o allow your spouse to return to live in Australia.

Although the visa will provide you with Australian permanent resident status for immigration purposes, there is no specific requirement under the conditions of the visa for you to reside in Australia.

Your main purpose in applying for the visa is to enable your spouse to return to live in Australia to support your children while they study here.

You have no intention to live permanently in Australia for the next ten years.

You have substantial business interests in another country which you intend to maintain and grow over the next ten years.

You also have substantial real estate interests and other assets in another country.

You have an interest in an Australian business.

You have a family bank account in Australia.

You do not expect the value of your Australian assets to exceed the value of the assets you have in another country.

You have a manager in place in Australia to mange your Australian business.

When you have previously travelled to Australia, your trips have been for less than 16 days each and totalled less than three months in any financial year.

Your future trips to Australia will be for less than 15 days at a time and will total less than three months in any financial year.

The purpose of your visits to Australia have and will be to visit spouse wife and children, and attend to matters arising in relation to your Australian business.

Apart from your spouse who is currently residing with you in the family home in another country, and your children who reside and attend school in Australia, the remainder of your family lives in another country.

Your spouse (when residing in Australia) will return to another country with your children to live with you during Australian school holiday periods.

You are a member of various professional organisations in another country.

You frequently dine out and attend a variety of social and business functions in another country.

You are over the age of 16, and neither you, nor your spouse, are members of the Public Sector Superannuation Scheme or eligible employees for the purposes of the Commonwealth Superannuation Scheme.

Relevant legislative provisions:

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

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

Residency for taxation purposes - general

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (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:

o the resides test,

o the domicile and permanent place of abode test,

o the 183 day test, and

o the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual. If residency is established under the resides test, the remaining three tests do not need to be considered.

If residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia notes that the ordinary meaning of the word 'reside' is wide enough to encompass an individual who migrates permanently to Australia, or one who is simply dwelling in Australia for a considerable time.

In relation to the holder of a business migrant visa, Taxation Ruling IT 2681 Income tax: residency status of business migrants notes that the granting of permanent resident status (for immigration purposes) to an individual under the conditions of a business migrant visa cannot be considered conclusive evidence that the individual will be a resident of Australia for taxation purposes. Taxation Ruling IT 2681 notes, for example, that a person who has been granted entry into Australia under a business migrant visa may postpone settlement in Australia for a number of years and that where this is the case, the person might not be considered a resident of Australia for taxation purposes.

However, length of time in Australia is not necessarily decisive in determining whether an individual is residing in Australia for taxation purposes. As noted in TR 98/17, what is more relevant is whether or not there is any degree of continuity, routine or habit in an individual's behaviour in Australia that could lead to the conclusion the individual is residing here according to the ordinary meaning of the word 'reside'.

Various factors are identified in TR 98/17 and IT 2681 as being useful in determining whether or not an individual would be considered to be residing in Australia according to the ordinary meaning of the word 'reside'. While all the facts and circumstances of an individual's behaviour are relevant, TR 98/17 and IT 2681 both specify that no single factor can necessarily determine residency.

Intention or purpose of presence

TR 98/17 notes that intention or purpose is to be determined objectively, having regard to all relevant facts and circumstances and specifies that:

o while individuals may have multiple reasons for being in Australia, there is usually a main purpose to their presence, and

o the notation on a visa is only an indicator as to an individual's purpose for being in Australia and is not the only consideration for determining residency for tax purposes.

You have stated your primary purpose in obtaining the visa is to provide a means by which your spouse can live in Australia to support your children while they complete their studies here. You intend to remain living in the family home in another country but will travel to Australia to visit your spouse and children and check on your Australian business interests.

Notwithstanding the fact that the visa provides you with permanent residency status in Australia for immigration purposes, you have no intention of moving to and residing permanently in Australia for at least 10 years. Furthermore, you have stated you will spend no more than three months in any particular financial year in Australia and will only travel to Australia for a maximum of 15 days at a time.

Considering your main purpose for obtaining the visa, we do not consider your intention or purpose for being in Australia is sufficient to suggest you will be residing here under ordinary concepts.

Family, business and/or employment ties

When assessing an individual's family, business and/or employment ties in terms of determining residency, IT 2681 notes it is necessary to consider the extent of such ties not only in Australia, but also in the individual's country of origin.

Furthermore TR 98/17 notes that the presence of an individual's family in Australia does not always result in a decision that the individual is residing here, and that setting up a business in Australia is only an indicator that an individual may be residing here.

With regard to your overall business interests, the majority of those interests are in another country. Furthermore, although you have set up a business in Australia, you intend to manage that business from another country with the assistance of an Australian based manager.

Considering the above, it is reasonable to conclude that your business association with another country is stronger and more significant than it is with Australia.

With regard to your family ties, whilst we acknowledge that you have an extensive family network in another country, we consider your family ties are greater with Australia than with another country. This conclusion is based on the fact that for the majority of the past several years, and for a number of years into the future, your immediate family (being your spouse and two children) either did, or will, reside in Australia while you remain in another country.

While you will visit your family in Australia and attend to matters arising from your Australian business while you are here, you do not intend to be in Australia for more than three months in any financial year and your trips to Australia will not exceed 15 days at a time.

Considering the above, we do not consider your family or business ties in Australia are sufficient to suggest you are residing here under ordinary concepts.

Maintenance and location of assets

IT 2681 specifies that the extent to which any assets or bank accounts are acquired or maintained in Australia and in the country of origin is a relevant factor in determining an individual's residency status.

In assessing the relevance of the maintenance and location of assets in respect of determining the residency status of an individual, TR 98/17 notes that:

· An individual may have a home and other assets outside Australia but still be considered to be residing in Australia for the duration of their stay if they occupy a home the individual owns or is purchasing in Australia.

· Other assets in Australia, such as motor vehicles and bank accounts, add further weight to the individual having established behaviour that is consistent with residing here.

In assessing this aspect of whether or not an individual could be considered to be residing in a place according to ordinary concepts, TR 98/17 notes that in The Commissioners of Inland Revenue v. F L Brown (1926) 11 TC 292 (Brown's case), the Special Commissioners held the taxpayer was not a resident of the United Kingdom after giving up his house in the United Kingdom and commencing to stay abroad for nine months in each year. The Special Commissioners placed considerable weight on the break in the taxpayer's habit of life on giving up his house. While Rowlatt J did express some concern at the decision, based on the existence of a bank account and family connections (in the United Kingdom), he could not find an error in law.

Looking at your situation, we can see that when your spouse and children are in Australia they reside in a home which you do not own but which can be said to provide you with a permanent place to live when you come to Australia. However, we must consider the fact that because you have not given up your family home in another country, you cannot be said to have broken your habit of life in another country.

Furthermore, while the existence of a family bank account and a business in Australia can be said to be Australian assets, the value of your Australian assets is far outweighed by the value of your assets in another country.

Considering the decision of The Special Commissioners in Brown's case, we do not consider that your Australian assets add any significant weight at this time to any conclusion that your behaviour is consistent with residing in Australia.

Social and living arrangements

TR 98/17 notes that social and living arrangements are the way an individual interacts with their surroundings and cites a number of examples that may indicate an individual's social and living arrangements are sufficient to suggest they are residing here.

Enrolling children in school in Australia is one of the examples cited in TR 98/17 as being a factor that could indicate an individual is residing in Australia.

However, in examining a taxpayer's social and living arrangements for the purpose of determining residency, Dixon J said (at CLR 778; ATD 399) in Gregory v. DFC of T (1937) 57 CLR 774; (1937) 4 ATD 397 (Gregory), that:

'The matters on which I place most stress in deciding this question of fact are his business interests and the necessity of his presence in Darwin and the fact that in dividing his attention between two businesses he gave as much or more attention to Darwin and the kind of social and living arrangements that he made in Darwin.'

Looking at your circumstances, we can see that the comments by Dixon J in Gregory are relevant.

In your case, you have business interests in Australia and another country but you are clearly giving more of your attention to your business interests in another country. This is evidenced by the fact that you intend to continue to grow your business interests in another country, that you will spend at least nine months of the year in another country, and that you have employed a manager in Australia for your Australian business. While you will maintain an eye on your Australian business from another country, and attend to any matter arising from that business when you travel here to visit your family, it is clear your attention is more focussed on your business interests in another country. This conclusion is also supported by the fact that you have stated your main purpose for obtaining the visa is to facilitate your wife being able to live in Australia.

Considering this, little weight can be placed on the fact that your children attend school in Australia when assessing your social and living arrangements for residency purposes. This is particularly the case when we consider that:

· Your spouse and children will essentially be living in Australia without you while you remain in another country for at least nine months in any financial year.

· Regardless of the fact that your immediate family may be residing in Australia away from you, you still have strong family ties in another country through other relatives.

· In general, your social and business ties are considered stronger with another country than they are in Australia.

· Although you have a permanent place to live when you come to Australia, you have not given up your family home in another country where you will reside for the majority of each financial year.

Accordingly, we do not consider your social or living arrangements are sufficient to suggest your behaviour is consistent with residing in Australia.

Considering all of the above, we do not believe your behaviour in Australia reflects a degree of continuity, routine and habit that can lead to a conclusion you are residing here according to ordinary concepts. Rather, we consider your home in another country is where you are residing according to the ordinary meaning of the word 'reside'. Accordingly, and based on the facts in this ruling, you will not be a resident of Australia for taxation purposes under the resides test during the period 1 July 2009 to 30 June 2015.

The domicile and permanent place of abode test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's domicile of origin. A person's domicile of origin will not usually change but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a domicile by choice outside of their domicile of origin, a person must have an intention to make their home indefinitely in a country outside their domicile of origin.

As specified in Taxation Ruling IT 2681, entry to Australia under a business migrant program is not, of itself, conclusive evidence that an individual has acquired a domicile of choice in Australia. If there is no intention for the individual to make their home indefinitely in Australia, the individual cannot be said to have acquired a domicile of choice in Australia.

Your domicile is in another country. Although the visa will provide you with permanent Australian resident status for immigration purposes, the visa does not require you to reside permanently in Australia. Furthermore, you have stated the main purpose for obtaining the visa is to enable your spouse to live in Australia to care for your children while they attend school here. You have also stated you have no intention of residing permanently in Australia for at least the next ten years. Instead, you will travel to Australia for periods not exceeding 15 days at a time and totalling less than three months in any financial year to visit your spouse and children, and attend to matters arising in relation to your Australian business activities.

As you have no intention to move indefinitely to Australia in the next ten years, and will not be required to reside permanently in Australia by the terms of the visa, we do not consider that you will obtain a domicile of choice in Australia if the visa is granted to you.

As a result, it is not necessary to consider where your permanent place of abode is under this test and, based on the facts in this ruling, you will not be a resident of Australia for taxation purposes under this test if the visa is granted.

The 183-day test

Where a person is present in Australia for 183 days during an income year, the person will be a resident of Australia for taxation purposes unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

TR 98/17 specifies that in most cases, if an individual is not residing in Australia under the resides test, their usual place of abode is outside Australia.

You will not be a resident of Australia for taxation purposes under this test because you have no intention to reside permanently in Australia for the next 10 years and you will only travel to Australia for periods not exceeding 15 days at a time and totaling less than three months in any financial year.

The superannuation test

Under this test, an individual will be considered a resident of Australia for taxation purposes if:

· they are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990,

· they are an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976, or

· they are the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

You are over the age of 16, and neither you nor your spouse are members of the PSS or eligible employees for the purposes of the CSS.

Accordingly, you are not a resident of Australia for taxation purposes under this test.

Conclusion - your residency status

Based on the facts in this ruling, you will not be a resident of Australia for taxation purposes between 1 July 2009 and 30 June 2015.