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Ruling

Subject: Residency for tax purposes

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You were born overseas.

You work for an overseas country.

You have been an employee of the overseas company for many years.

You are based overseas with your employment.

You and your family relocated to Australia a number of years ago on permanent resident visas.

Your family lives in Australia and you live in a town house overseas.

When you travel for personal reasons to Australia, you enter the country on your permanent residence visa.

You live with your family in Australia when you are not working.

You have no investments or assets in Australia.

Your spouse owns the house you reside in Australia, however, you are jointly liable with your spouse for the mortgage on the house.

You are not legally separated from your spouse.

You financially support your children.

When your children stay with you overseas you cover all the costs associated with the stay.

You have a few friends in Australia but you do not belong to any clubs or sporting associations in Australia as your stays are temporary and your time in Australia is focussed on seeing your children.

You have a number of assets overseas.

You have a number of social and sporting connections overseas.

You pay tax on your income overseas.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Section 6-1.

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 995.

Reasons for decision

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose 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

· the superannuation test

The first two tests are examined in detail in Taxation Ruling IT 2650.

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. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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 focuses on the quality and character of an individual's behaviour while in Australia (which includes, in addition to family and business ties, factors such as intention or purpose of presence, social and living arrangements, and maintenance and location of assets), in conjunction with the period of physical presence in Australia.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.

In your case, you have ties to both Australia and the overseas country.

Although you have strong financial and economic ties to the overseas country, your ties to Australia are stronger because your family reside in Australia, and you return to your family home in Australia when you are not working. The main purpose of your presence in Australia is to be with your family, whereas the main purpose of your presence in the overseas country is to work. This indicates that you are residing in Australia according to the ordinary meaning of resides.

As you are residing in Australia, you are a resident of Australia under the resides test.

It is therefore not necessary to consider whether you are a resident of Australia under any of the three statutory tests.

Your residency status

You are a resident of Australia for taxation purposes.

You are required to declare your income both in and out of Australia in your Australian tax return.