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Ruling

Subject: Residency for tax purposes

Questions and answers

Were you a resident of Australia for tax purposes for period 1?

No.

Were you a resident of Australia for tax purposes for period 2?

Yes.

Were you a resident of Australia for tax purposes for period 3?

No.

Were you a resident of Australia for tax purposes for period 4?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are a citizen of Australia.

You lived in Country X for a number of years on an employment visa until the end of period 1.

You entered into an agreement with your employer to move to Country Y to work for a three year period, with an option to extend the contract.

You returned to Australia for period 2.

During period 2 you:

· stayed at your family members' home in Australia

· travelled to various countries to work (including Country Y and Country X)

· spent some time on vacation in Australia

· stayed in a home you and your spouse own in Australia

· You did not intend to take up residence in Australia upon your return to Australia from Country X. At this time, you intended to remain in Australia for only a few weeks.

· You shipped a majority of your belongings from Country X to Country Y at the beginning of period 2.

· Due to unexpected delays, your goods were not released, and you were unable to obtain an appropriate visa, until the end of period 2.

· You and your spouse travelled to Country Y at the beginning of period 3.

· You were in Country Y for period 3 on a Country Y business visa.

· Your employment in Country Y was terminated at the end of period 3 and you returned to Australia.

· Your spouse travelled to Country Y three times on a tourist visa during period 3.

· When not in Country Y your spouse stayed with their children in Australia, travelled to Country X and travelled to visit family overseas.

· You financially supported your spouse at all times.

· You continued to maintain your financial and social connections with Country X.

You maintained the following assets in Country X:

· Bank accounts

· Life insurance

· An office

You also established social connections in Country Y.

You held a bank account in Country Y.

You have the following assets in Australia, which were all held while you were in Country Y:

· Superannuation fund account

· Investment account

· Vehicles

· Apartments

· House

You purchased the house several years ago and it was used as an investment property until some family members moved into the house in the year ended 30 June 2011.

In the years ended 30 June 2011 and 30 June 2012, you were physically present in Australia for less than 183 days.

Neither you, nor your spouse, are eligible to contribute to a superannuation fund established under the Superannuation Act 1976 or the Superannuation Act 1990.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

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, and

· the superannuation test.

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'.

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.

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

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia 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 your case, you lived in Country X for a number of years, before deciding to move to Country Y. Between living in Country X and Country Y you temporarily returned to Australia. As your stay in Australia was only intended to be temporary, you were not residing in Australia according to the ordinary meaning of the word.

Therefore, at no time during the period 1 July 2010 to 30 June 2012 were you 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 a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

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

Your domicile is Australia because you are an Australian citizen only.

Although you lived in Country X for a number of years, you were there on an employment visa and there is nothing to suggest that you relinquished your Australian domicile and chose a new domicile in Country X. Furthermore, there is nothing to suggest that you later relinquished your Australian domicile and chose a new domicile in Country Y.

Permanent place of abode

It is clear from the case law 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.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

· 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, 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.

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

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… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

Application to your circumstances:

Period 1

The Commissioner is satisfied for the period that you were living in Country X you had a permanent place of abode outside of Australia.

Therefore, for this period you were not a resident of Australia under the domicile test.

Period 2

For period 2, the Commissioner is not satisfied that you had a permanent place of abode outside of Australia. During this time you did not have an abode in Country X or in Country Y. The fact that you intended to set up a home in Country Y is not sufficient to constitute a "permanent place of abode".

Therefore, for this period you are a resident of Australia under the domicile test.

Period 3

The Commissioner is satisfied for the period that you were living in Country Y you had a permanent place of abode outside of Australia.

Therefore, for this period you were not a resident of Australia under the domicile test.

Period 4

For period 4, the Commissioner is not satisfied that you had a permanent place of abode outside of Australia. During this time you were physically present in Australia did not have an abode in Country X or in Country Y. Your employment in Country Y was terminated and you had not set up a home in any other country. The fact that you intended to return to Asia is not sufficient to constitute a "permanent place of abode" outside of Australia.

Therefore, for this period you are a resident of Australia under the domicile test.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here.

You were not physically present in Australia for more than 183 days in either of the income years ended 30 June 2011 or 30 June 2012, therefore you are not a resident of Australia under this test.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees.

This test is not relevant to you as neither you, nor your spouse, have ever been Commonwealth government employees.

Your residency status

Period 1 and Period 3

You were not a resident of Australia during period 1 and period 3 as during these periods you did not meet any of the four tests of residency.

As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.

Period 2 and Period 4

You were a resident of Australia during period 2 and period 4 as you met the domicile test.

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.