Edited version of your private ruling

Authorisation Number: 1012472682950

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for tax purposes from the time your family returns to Australia?

Yes

This ruling applies for the following periods:

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You were born overseas but later became a citizen of Australia.

You moved to Country X with your family in 2005.

You became a non-resident of Australia for tax purposes at the time you departed Australia to live in Country X.

Your family intends to return to Australia to live for educational purposes.

You intend to support your family by transferring money to them in Australia for their living expenses.

You intend to spend most of your allowed leave in Australia with your family.

You own a block of land in Australia on which you intend to build a house.

You intend to join your family in Australia to live permanently once you have completed your employment contract requirements in Country X.

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 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.

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'.

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 a recent case Iyengar and Commissioner of Taxation [2011] AATA 856 (Iyengar's case) the AAT found the individual was a resident of Australia under the resides test because of his continuity of association with Australia by maintaining his jointly owned home in Australia and the fact that this spouse remained in that home in Australia.

In reaching its conclusion the Tribunal considered the following factors:

· the taxpayer maintained a place of abode in Australia, being his family home, whilst he was employed overseas;

· he left behind in Australia some of his personal items;

· his family remained in Australia;

· he was in harmonious relationship with his spouse;

· he used all his foreign income to make additional payments on his mortgage; and

· his holidays in Australia were at his family home.

In your case you have ties both to Country X and to Australia. You are staying in your home in Country X whilst you family leaves for Australia. However, your intention will be to join your family once you have fulfilled your work obligations in Country X.

Your stay in Country X is merely to fulfil your work obligations. You will be financially supporting your family in Australia and will be spending most of your allowed leave in Australia with your family.

You also have some land in Australia on which you intend to build a house.

Therefore your ties with Australia are stronger than with Country X and it can be said that you reside in Australia under the ordinary meaning of the word. Therefore you are a resident of Australia under this test.

As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency.