Edited version of your private ruling

Authorisation Number: 1012497108362

Ruling

Subject: Residency status

Question and Answer:

Will you be a non-resident of Australia for tax purpose from date A?

Yes

This ruling applies for the following period:

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Background facts

You are an Australian citizen whose country of origin is Australia.

You departed Australia for Country X, m years ago, on an 'Employment Government' visa to work on a project. The visa has been 'renewed many times'.

You ceased to be a Commonwealth Government employee, several years ago, and neither you nor your spouse currently holds a position with the Commonwealth Government of Australia

You decided to make your home indefinitely outside Australia on date A when you:

· set up a business in Country X in your name with a Country X postal and business premises address; and
resigned from the Country X Public Service.

You lodged an applied for naturalisation in Country X. This can be done only:

· after a number of years of residing in Country X; and
where you intend to stay in Country X permanently.

You have no intention to return to Australia to live permanently.

You plan to visit your spouse in Australia 2-3 times a year for about one month's duration each time.

You take up contracts as part of your business in other countries.

You pay tax in Country X.

You intend to advise Medicare and your Australian private health insurer to remove your name from their records.

You have both Australian and Country X bank accounts. An Australian-sourced pension and dividends are paid into the Australian bank account to pay the mortgage on your Australian unit. Pay for your work in Country X is deposited into your Country X bank account.

Accommodation in Country X

Since moving to Country X, you have rented the same accommodation for n years.

This accommodation is not provided by your employer, but you did originally receive an allowance.

The accommodation is a large fully furnished house

You pay rent to the landlord regularly. You intend to stay in this current accommodation indefinitely.

You buy your own food and cook your own meals.

Australian assets

You retained sole ownership of a dwelling in Australia which you lived in before going to Country X. Your spouse currently resides in the dwelling, and is the beneficiary of the dwelling in your will. The dwelling is currently mortgaged.

You stay in the dwelling when you visit your spouse.

A number of assets are owned either singly or jointly by you, and remain in the Australian dwelling:

You did own a car in Australia, but sold it several years ago.

You took the following items to Country X from Australia:

· all clothes and shoes;

· sporting and recreational equipment including swimming gear; and

· most books, CDs and DVDs,

Your assets in Australia include:

· a very small share in a family business;

· a bank account in Australia; and

· a line of credit with an Australian financial institution so you can pay off the mortgage.

Country X assets

The assets you hold in Country X are:

· a car (you have a Country X driver's licence);

· bank account for both personal and business purposes;

· household items and sporting equipment.

Australian economic and social ties

Your income sources from Australia are a Government superannuation pension and franked dividends from a unit trust. As at date A, you are not eligible to contribute to the Government pension fund, having ceased employment with the Commonwealth Government.

You advised your Australian bank that you are a non-resident of Australia for taxation purposes.

You have social and sporting connections with Australia, being an international member of some sporting clubs.

You have not yet removed your name from the Australian Electoral Office /Roll and have registered as an overseas voter. You will deregister when advised of your residency status and also when your naturalisation application has been processed as then you will be able to register in Country X to vote.

You have not advised Medicare or your health insurance provider to remove your name from their records. You will do this if the ATO decides you are no longer a resident of Australia for tax purposes.

Country X economic and social ties

You operate a business in Country X and possess a business licence there.

You pay tax in Country X and have a Country X tax number.

The income you earn from your Country X business is paid into a Country X bank account. In future you will send money to Australia to pay off the mortgage.

You have many social and sporting connections with Country X up to international level

Your spouse

Originally went with you to Country X for a number of months at the start and returned to Australia.

Does not live with you in Country X as they do not like it there.

Supports themselves in Australia by obtaining employment and using credit cards in both their and your names.

Visits you in Country X once a year.

Your children

You have a stepchild who lives in Country Y.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision

In part, subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) states that:

resident or resident of Australia means:

· a person, other than a company, who resides in Australia and includes a person:

i.
(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

ii.
(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or

iii.
(iii) who is:

(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or


(B) an eligible employee for the purposes of the Superannuation Act 1976; or


(C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); and

Based on the definition cited above, there are four tests of residency:

· the 'resides' test;

· the 'domicile' and 'permanent place of abode' test;

· the 183 day test; and

· the Commonwealth superannuation fund test.

Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of 'resident' beyond the 'resides' test.

Whether you are a resident of Australia for Australian taxation purposes under these tests is determined based on the facts of the particular case. Thus, it is not possible to provide general advice regarding residency which will be applicable in all cases.

Application of 'resides' test to the your circumstances

In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; (2002) 51 ATR 1173 at paragraph 43-44, it was determined that the word 'resides' should be given the widest meaning.

There have been a number of factors identified which can assist in determining if a particular taxpayer 'resides in Australia. According to paragraph 20 of Taxation Ruling 98/17 (TR 98/17), factors to be considered in determining residency in Australia are:

· intention or purpose of presence;

· family and business/employment ties;

· maintenance and location of assets; and

· social and living arrangements.

Paragraph 21 of TR 98/17 further states that:

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Recent case law decisions have expanded on the list of factors identified in TR 98/17. Case 5/2013¹ and Sneddon v FC of T, for example, considered the following factors in relation to whether the taxpayer resided in Australia:

(i) Physical presence in Australia

(ii)Nationality

(iii) History of residence and movements

(iv) Habits and 'mode of life'

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of Place of abode.

Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1) of the ITAA 1936. In considering these factors, it is important to acknowledge that you are only seeking to be treated as a non-resident from date A. Thus, while your residency history prior to this time may provide some indication of your likely residency behaviour in the future, your residency status from date A must also be based on the your stated intentions regarding where you propose to reside in the future.

(i) Physical presence in Australia

As indicated in Iyengar v FC of T, there is a requirement that you at least be physically present in Australia for part of an income year.

Over the previous m years, you have been present in Australia for a one month period on two or three occasions in any given income year. Further, you have not indicated that this pattern of behaviour is likely to change in future years.

By comparison, the applicant in Case 5/2013 was considered a resident of Australia despite only being present in Australia 5 of the 52 weeks under consideration, as his visits were said to:

…indicate that the Taxpayer retained a "continuity of association" with Australia, together with an intention to return to Australia and an attitude that Australia remains "home".

Thus, the fact that you:

· have been physically present in country X for the majority of the previous m years; and

· will in the future continue to be physically present in country X for the majority of any income year

is not sufficient in itself to establish that you are not a resident of Australia.

(ii) Nationality

While you are presently an Australian national, this is not in itself sufficient to establish that you are an Australian resident for tax purposes.

You are currently seeking naturalisation in Country X as you now meet the conditions to apply for naturalisation

(iii) History of residence and movements

You have not resided in a country other than Australia prior to his taking up employment in Country X.

(iv) Habits and 'mode of life'

Just as the taxpayer in Case 5/2013 resided in a serviced apartment in Singapore and fully-furnished quarters provided by his employer in India;² and the taxpayer in Sneddon had a fully-furnished apartment leased by his employer

You have been living in a fully-furnished rented house which is available for your exclusive use, and for which you originally received an allowance from your employer. Unlike the taxpayers in Case 5/2013 and Sneddon, however, you have had exclusive use of the same four bedroom residence for the past m years.

Unlike the taxpayers in Bezuidenhout v Commissioner of Taxation and Sneddon, you do not remit the bulk of your overseas employment remuneration to Australia to maintain your family or, in the case of Sneddon '…to meet his Australian obligations including his mortgage, rates, taxes, internet and telephone account, car loan and computer loan'.

It is noted that you deposit your Australian superannuation pension into your Australian bank account to pay your mortgage, presumably obviating the necessity to deposit your Country X business income in your Australian bank account to meet this obligation. It is also noted that your spouse has access to credit cards held in joint names. Equally, however, you utilise your Country X income to meet your living costs in Country X, including rental of your residence in Country X.

While you retain international membership of Australian sporting clubs, you are also fully integrated into Country X life, especially considering your administrative roles in various local and national Country X sporting bodies.

(v) Frequency, regularity and duration of visits to Australia

According to the information provided by the applicant, you have repeatedly returned to Australia over the previous m years.

As stated above, the taxpayer in Case 5/2013 was considered a resident of Australia despite only being present in Australia 5 of the 52 weeks under consideration.Equally:

the taxpayer in Sneddon was considered to reside in Australia notwithstanding that he had only been present in Australia in the 2008/09 income year for separate periods of only two weeks, three weeks and two and half weeks and

the taxpayer in Iyengar had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months.

However, it should be noted that you have continued to remain in Country X for a significant majority of each of the last m income years, and that you intend to do so indefinitely.

(vi) Purpose of visits to or absences from Australia

As indicated above, the reason for your absence from Australia for the majority of the previous m years is your undertaking of employment for an employer. The purpose of future absences will be your undertaking of the tax law consultancy business in Tonga and in developing countries.

The reason for your presence in Australia in the last m years and into the future is to visit your spouse.

In determining that the taxpayer in Crockett and Commissioner of Taxation (Crockett) was an Australian resident despite working overseas for a three year period, Senior Member Beddoe noted that:

During the period, the applicant's wife remained in Australia and the applicant returned frequently to be with her.However, the taxpayer's visits to his spouse was only one of a number of factors considered in Crockett. Specific reference was also made to the taxpayer's decision to migrate to Australia, the granting to him of Australian citizenship and the taxpayer's lack of a fixed place of abode outside Australia.

By contrast the, you are seeking naturalisation in Country X and have had a fixed place of abode in Country X for the past m years.

(vii) Family and business ties to Australia and the overseas country or countries

Family

It is significant that in the recent decisions regarding the residency status of persons working overseas, including Beizuidenhout, Case 5/2013, and Iyengar, the taxpayers had both a spouse and children residing permanently in Australia. There is particular emphasis placed in these decisions on the taxpayers' Australian residence being the 'family home'.

The Macquarie Dictionary defines 'family' as:

· parents and their children, whether dwelling together or not.

· one's children collectively.

· any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins.

By contrast, you do not have any dependent children living either in Country X or in Australia, having only a stepchild (of unstated age) living in Country Y. Thus, despite your marital status, it can be questioned whether your 'family' reside in Australia in the same way as taxpayers in the cases recently considered.

Further, it may be questioned whether it is axiomatic that a married person engaged in non-Australian employment would otherwise choose to reside with their spouse in Australia. In the recent AAT residency case Ellwood v FC of T, Letcher SM referred to the '19^th century statement' ' "Ubi uxor, ibi domus" (home is where the wife is)'.

However, this current case would appear to be one in which you and your spouse retain their marital status and marital relationship, without intending to reside together on a permanent basis. Based on your statement, you prefer to live in Country X, while your spouse, who did not enjoy living in Country X, prefers to live in Australia. Thus, the fact that your spouse decided to return to Australia from Country X to live on a permanent basis is not evidence that you currently have, or will ever have, the same intention. Indeed, as discussed below, the evidence available to us regarding your, establishment of a business in Country X, and attempt to gain Country X naturalisation suggests a contrary intention.

Thus, while your spouse remains in Australia, it cannot be concluded that you have the intention to live in Australia on a permanent basis.

Business or economic

In terms of 'business' or economic ties, the recent cases considering residency concerned taxpayers who were on short term employment or independent services contracts, rather than those who had established businesses overseas.

You have hitherto been employed on a contract basis, albeit for m years, suggesting a less than permanent relationship with Country X. Equally, however, you have not been employed in Australia for the past m years.

Further, you have established a business in Country X. This suggests you will not be undertaking business activities or employment in Australia in the future.

You are in receipt of an Australian government superannuation pension, and the only residential property owned by you is located in Australia. However, you have derived Country X sourced salary for the past m income years, and will presumably be deriving non-Australian sourced business income in the future. You have also established a long-term and exclusive occupancy of a rental property in Country X.

Assets

Unlike the taxpayer in Sneddon, you disposed of the motor vehicle owned in Australia after moving overseas to work.

Like the taxpayer in Iyengar you have retained ownership of furniture and electrical goods contained in your Australian property, including items left in Australia at the time you and your spouse first travelled to Country X. However, given the continued marital relationship between you and your spouse, and your spouse's occupancy of the Australian property, it is reasonable to expect that you would not have sought the disposal of any domestic items located in Australia which could be used by your spouse.

You have also acquired household assets in Country X.

This can be contrasted with the taxpayer in Iyengar, who did not purchase substantial property whilst overseas, but retained substantial property in Australia.

(viii) Maintenance of Place of abode

You clearly maintain a property in Australia of which you are the sole owner. However, it is equally clear that it is only your spouse who lives in this residence on a permanent basis, with your rented premise in Country X being the place where you spend the majority of each income year.

However, as indicated above, given that you and your spouse are still in a marital relationship, it is accepted that you would choose not to dispose of the property but maintain the property for your spouse's use - that is, the ownership of the property can arguably be considered evidence of your provision for your spouse, not evidence of your intention to return to Australia to live permanently.

Further, for the last m years, you have had the exclusive use of a large rental property in Country X. This contrasts with the one-bedroom 'hotel-style accommodation' available to the taxpayer in Bezuidenhout. You have stated that you intend to continue to remain in this property for as long as you continue to live in Country X.

Summary

As stated in paragraph 21 of TR 98/17:

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

There are some factors considered above which would indicate that you have not ceased to be a resident of Australia, including your physical presence in Australia for part of the income year and your maintenance of an Australian property in which your spouse permanently resides.

Equally, however, your circumstances are markedly different from those considered in most recent Australian residency cases. In particular, the emphasis given in these cases to the place where the taxpayer's 'family' resides may not be appropriate for your current case.

Unlike the view of marital arrangements discussed in Ellwood, it is accepted that you and your spouse have chosen to live in separate countries, notwithstanding your spouse resides in a property in Australia which you own, and that you periodically return to Australia to visit your spouse.

It is also considered that your 'habits and mode of life' and working arrangements in Country X are of a far more enduring nature than those considered in the recent Court and AAT decisions.

Your:

· m years of consecutive (albeit temporary) employment in Country X;

· decision to register and commence an independent business in Country X from date A; and

· efforts to secure Country X naturalisation

· sets you apart from the taxpayers engaged in temporary employment who are considered in these decisions.

Based on a consideration of all of the factors outlined above, it is concluded that you did not 'reside' in Australia in accordance with the ordinary meaning of the word from date A.

Other residency tests

Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the 183 day test, superannuation fund test and domicile and permanent place of abode tests.

183 day and superannuation fund tests

As you will not be in Australia for a period of more than one half of any future year of income, the 183 day test is not relevant.

Equally, while you continue to be the recipient of an Australian Government superannuation pension, the superannuation test does not apply to taxpayers who are no longer working for the Australian Public Service. You ceased to be a Commonwealth Government employee on date B.

Neither you nor your spouse currently holds a position with the Commonwealth Government of Australia. Thus, the superannuation test will not apply as at date A.

Domicile and permanent place of abode

As stated above, a taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where the taxpayer's '…domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia.'

Domicile

As stated in paragraph 8 of Income Tax Ruling IT 2560:

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.)) .

Paragraph 9 of IT 2650 then states that:

The common law test of domicile of choice has now been restated in section 10 of the Domicile Act which provides:

"The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his home indefinitely in that country."

According to paragraph 21 of IT 2650:

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 e.g., 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.

Application to the your circumstances

Your domicile of origin was Australia.

Further, you have previously relied on 'Employment Government' temporary visas to extend your stay in Country X with the visas having been 'renewed many times'.

However, you have contended that Country X became your domicile of choice from date A. The change in domicile is stated to be evidenced by your:

· establishment of a business in Country X;

· application for Country X naturalisation; and

· intention to live in Country X indefinitely.

Given that you have ceased to undertake work for which you previously secured government employment visas, your ability to remain in Country X indefinitely appears to be dependent on the success of your application for Country X naturalisation. As stated in paragraph 21 of IT 2650, to establish a new domicile of choice, you must be able to:

· prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. (emphasis added)

It does not appear to be sufficient to establish a new domicile of choice that you intend to remain in Country X indefinitely, without any evidence that you will be able to do so, through, for example, a migration visa / permanent residence, rather than relying on the continual renewal of a temporary visa.

We acknowledge that you are in the process of applying for naturalisation in Country X, however this has not yet been granted.

Thus, notwithstanding your stated intention to remain in Country X indefinitely and the fact that you have applied for naturalisation, it cannot currently be concluded irrefutably that you have changed your domicile from Australia to Country X.

Permanent place of abode

Even if your domicile of choice is still Australia rather than Country X, you will cease to be a resident of Australia if your permanent place of abode is outside Australia.

In the Full Court decision in FC of T v. Applegate, Fisher J stated at 4317 and 910-911 that a taxpayer's 'permanent place of abode' was:

...the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place".

Indeed, paragraph 23 of IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode, being:

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

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.

Consideration of these factors

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

You have already stayed in Country X on a temporary basis for the last m years. You intend to stay in Country X indefinitely with short visits to your spouse in Australia a few times a year. business.

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.

You intend to remain in Country X indefinitely, and do not intend to return to Australia to live permanently at any time in the future.

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.

You have lived in the same large rental property in Country X for the last m years, and intend to remain in this dwelling for the future.

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

You have maintained a property in Australia which is occupied by your spouse. You only live in this property when you visit your spouse.

The duration and continuity of the taxpayer's presence in the overseas country.

You have lived in Country X for m years, albeit on temporary visas. You intend to live there indefinitely.

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.

As indicated above, you do maintain a bank account in Australia as well as in Country X. You intend to advise Medicare and the Australian Electoral Commission to remove your name from their registers.

While your spouse remains in Australia, this is the result of the spouse's unwillingness to live in Country X, rather than evidence of the place to which you intend to return. Your only child is a stepchild living in Country Y.

You intend to remain in Country X, and have established a Country X business and have significant sporting ties with Country X which evidence your current and intended future association with this country.

Analysis of place of abode

Although it cannot conclusively be established that you have currently established a domicile of choice in Country X, it is considered that you have established a permanent place of abode in Country X.

Notwithstanding that you have a home available to you in Australia where your spouse resides and you are only renting a property in Country X, given the pattern of your behaviour over the previous m years and your intended future behaviour it is concluded that the Country X rather than the Australian property is the place at which you have lived 'permanently' or for a considerable time, and is also the place where you will reside indefinitely.

Thus, the Commission is satisfied that you have established a permanent place of abode in Country X.

Conclusion

You are not a resident of Australia under the resides test or the three statutory test from date A.

¹ [2013] AATA 394; 2013 ATC 1-054

² at para 54