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Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for tax purposes?

Yes

This ruling applies for the following period

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2008

Relevant facts

You are a citizen of Australia. Your country of origin is Australia.

You departed Australia to take up a job in Country X.

Your job takes you to a number of countries outside of Australia.

You do not have a visa but you hold a permit to work in Country X.

You do not intend to return to take up residence in Australia.

You live in a share house in Country X which you share with a work colleague and your partner. The accommodation is not provided by your employer.

The share house is an apartment and you occupy a private room.

The apartment is rented through a private agreement with the actual tenant on the lease. The lease is for 12 months and will continue until either party discontinues the agreement.

When staying in Country X you mainly eat out at restaurants or occasionally buy groceries to prepare your own meals. When you are working all the meals are provided for you.

Your employment income is derived in Country X and you report and declare your taxes there.

You have been divorced from your former spouse for a number of years and you have a child in Australia.

You will pay child support for your child for the next few years.

You visit Australia regularly on a fortnightly basis for the purpose of visiting your child. Your child is prevented from visiting you in Country X due to family court order restrictions.

You have stated that when your child is of adult age then you will spend less time in Australia and you will move to another country as the cost of living is better.

Your travel to Australia is at your expense and not part of your employment.

When you come to Australia you live in a house you purchased in the same street as your former spouse in order to be close to your child and school. The house remains vacant when you are not living there.

Your overseas assets are minimal - a bank account, credit card and superannuation fund through your overseas employer.

Your assets in Australia include - properties, one of which is an investment property. You have shares and bank accounts and a superannuation fund which you have not contributed to for a number of years.

You have no social or sporting connections in Country X due to your shiftwork. You do eat out regularly when in Country X as eating out there is a very important social connection.

Your typical working arrangement is working a shift in various countries, a very short break in Country X, a number of nights in Australia to see your child, back in Country X and then you start work again.

You spend more nights in Australia with your child than you spend in Country X.

You are not or never have been an employee of the Commonwealth of Australia.

Personal items owned by you and located in your Australian residence include:

§ Car - registered in your name

§ beds

§ Fridge

§ Dining table

§ desks

§ lounge

§ lounge chairs

§ wardrobes

§ storage cabinet

§ drawers

§ bookshelf

§ t.v's

§ computer

§ Clothing

§ Books, cd's and dvd's are in storage at your parents house

Personal items owned by you and located in your Country X residence include:

§ bed

§ desk

§ wardrobe

§ storage cabinet

§ chest of drawers

§ bookshelf

§ clothing

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

An Australian resident for tax purposes 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 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: 

§ the resides test,

§ the domicile test,

§ the 183 day test, and

§ 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.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other 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'.

Taxation Ruling TR98/17 explains the Commissioners view of what constitutes residency according to "ordinary concepts".

It provides that the quality and character of an individual's behaviour while in Australia assist in determining whether the individual resides here. When considering the quality and character of an individual's behaviour the following factors should be considered:

§ intention or purposes of presence

§ family and business/employment ties

§ maintenance and location of assets

§ social and living arrangements.

Your behaviour indicates that you are residing in Australia under the resides test. The factors that indicate that you reside in Australia are:

§ Although you do not intend to live in Australia permanently once your child is of adult age, you have been living in Australia on a consistent basis every two weeks for a number of nights

§ You actually only stay in Country X for less than the days you spend in Australia with your child. When you are not travelling between countries as part of your job you are mostly in Australia living in a house owned by you with your child.

§ You have a number of personal items located at your house in Australia and some items are stored at your parent's house in Australia

§ Assets in Australia include, amongst other things, a car, house, investment property, shares, bank accounts and superannuation

§ You are renting accommodation in Country X whereas the house you return to in Australia regularly is a house you purchased which has your belongings in it

Although you have been working for a Country X Company, are paid by them you only spend a few nights in Country X, your associations with Australia are considered to be more significant.

Therefore you are a resident of Australia under the resides test.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

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 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

You have maintained your Australian domicile because:

§ You are an Australian citizen and your country of origin is Australia

§ You are not a citizen of any other country

§ You have not applied for a resident visa in Country X, you have been there on a work permit

Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia.

Permanent place of abode

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.

It is clear from Applegate and Jenkins that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which have been considered relevant by the Courts and Boards of Review/Administrative Appeals Tribunal and which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

(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.

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive.

The Commissioner is not satisfied that you have a permanent place of abode outside Australia because of the factors provided under the resides test.

Therefore you are a resident of Australia for tax purposes under the domicile test.

Your residency status

As you are a resident of Australia under the resides test and domicile test of residency there is no need to examine the remaining tests.

Conclusion

You are a resident of Australia for income tax purposes.

Your foreign income is assessable in Australia and you are required to lodge a tax return in Australia. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid.