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Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes?

Yes.

This ruling applies for the following periods

Year ended 30 June 2011

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You are an Australian citizen.

You departed Australia in late 2008 to work in country A.

You live and work in country A on an employment visa.

You do not intend residing in country A permanently.

You intend returning to Australia when your employment ceases.

You have returned to Australia for short visits to visit family and friends

You live in a rented apartment in country A

You do not have any assets or investments in country A.

You own your family home in Australia and your family live in the property while you are overseas.

Your family do not accompany you overseas.

You work under an employment contract while in country A which may be extended.

You do not have any social or sporting connections in Australia or country A.

You and your spouse have never been a Commonwealth Government of Australia employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Subsection 6-5(2).

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

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

§ 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.  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 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'.

Taxation Ruling TR 98/17 considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

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

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

§ 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

§ 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

§ whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence

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

§ the durability of association that the person has with a particular place in Australia, that is, 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.

You advised that:

§ You departed Australia in late 2008 to live and work in country A,

§ you live in a rental property in country A,

§ your spouse and children live in Australia,

§ your spouse and children did not accompany you to country A,

§ you returned to Australia for short periods to spend time with family;

§ you intend returning to Australia to live when your employment ceases

§ you live and work under a employment visa in country A,

§ your contract in country A may be extended after 2013, and

§ you own a property in Australia.

Based on this information you were residing in Australia from the date you departed Australia as your family and assets remain here. During this period of time your family home remains in Australia and you were only in country A to work.

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.

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law (Henderson v. Henderson [1965] 1 All E.R.179; Udny v. Udny [1869] L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.)) .

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 country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency.

Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that 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 his or her home indefinitely in that country for example, through having obtained a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

In your case, you are an Australian citizen, you live and work in country A under an employment visa, you returned to Australia several times since 1 July 2009 to spend time with your family, and you intend returning to Australia permanently when your employment in country A ceases. Therefore, you are considered to have maintained your Australian domicile.

In addition, although you lived and worked in country A from late 2008, your associations with Australia are considered to be more significant as:

§ your wife an family remain in Australia while you are in country A

§ you live in rental accommodation in country A

§ you own a family home in Australia, and

§ you intend returning to live in Australia when your employment ceases in country A.

Based on these facts, you have not established a permanent place of abode in country A. You are, therefore, a resident of Australia for income tax purposes under the domicile test.

The 183-day test

This test does not apply to as you will not be in Australia for 183 days or more in the period under consideration.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

You will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status

As you meet the resides test and the domicile test, you are a resident of Australia for tax purposes.

As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia and will therefore include the income you receive overseas.