Edited version of your private ruling

Authorisation Number: 1012511676421

Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for taxation purposes for the period you are living in country Y?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on:

1 July 2013

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.

You were born in Australia and you are a citizen of Australia.

You intend on moving from Australia to Country Y to live and start a business.

You and your spouse have purchased a lease for xx acres of land in Country Y on a long term lease.

In addition to the purchase of the lease you pay an annual lease fee of $xxx.

The land is currently a plantation and you have commenced removal of the vegetation on the land and have your own crops in the process of being ready for planting.

You intend on living in Country Y for 5 to 10 years.

Your spouse will accompany you to Country Y.

Your spouse is a citizen of Australia and was born in Australia.

You may return to Australia when your spouse retires.

You do not need a visa to enter Country Y as you are a Commonwealth citizen.

You can stay in country y for 30 days as a Commonwealth citizen. You are required to leave Country Y after 30 days.

You and your spouse will be applying for a self funded resident's visa for Country Y.

This visa is valid for up to 10 years if granted. Your spouse works in country Z and has a work visa for Country Z.

Your spouse works on a 'fly in and fly out' basis in country Z working xx days on and xx days off.

Your spouse will fly through Australia from Country y on their way to work in country Z, and back through Australia, from Country Z to country Y, on their return.

Your spouse will be in Australia for less than 183 days in a financial year and will stay with family during this period in a number of locations in a number of Australian States.

You will travel with your spouse to Australia for the xx days they are working in Country Z and you will wait for them to return to Australia and return to country Y with them.

You will stay with family in a number of States while in Australia caring for family.

You do not want to stay in Country Y on your own so will stay in Australia for the period your spouse is working.

You will be in Australia for approximately xxx days each financial year.

You will stay in country Y when you do not accompany your spouse back to Australia on their way to country Z for work.

You are unemployed and will not be working for the time you are in Australia.

You will rent out your home in Australia fully furnished on a commercial basis.

Your existing rental property in Australia will remain rented out and all income from both properties will be declared.

You have signed a lease for a rental property in country Y.

This lease is a month by month lease.

You will be taking all of your personal belongings to Country Y.

You have had your name removed from the electoral roll.

You have notified Medicare that you are a non-resident.

You have notified your bank that you are a non-resident.

Neither you nor your spouse are currently or have ever been Commonwealth government employees.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Subsection 995-1(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

· the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (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 resides.

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

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test, specifically:

· Physical presence in Australia

· Nationality

· History of residence and movements

· Habits and "mode of life"

· Frequency, regularity and duration of visits to Australia

· Purpose of visits to or absences from Australia

· Family and business ties to different countries

· Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Physical presence in Australia

A person does not necessarily cease to be a resident because he or she is physically absent from Australia.

In relation to this the AAT has stated that:

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.

You and your spouse have gone to Country Y with the intention to live and run a business.

Your home is being rented out in Australia on a commercial basis and you are not sure when you will return to Australia.

You will be physically present in Australia for approximately xxx days in each year and you have a place in Australia that you can return to and that you consider your home.

Your spouse will be physically present in Australia for approximately xx days.

In recent court cases taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia.

In Iyengar v FC of T (Iyengar's case), it was indicated that there is a requirement that you at least be physically present in Australia for part of an income year. Further in this case it was considered that the taxpayer remained a resident of Australia for income tax purposes even though during the period he was working overseas (2 years and 7 months) he had only returned to Australia for a two week period and for a 10 day period.

It is important to note in your case that you and your spouse are only able to be present in Country y for 30 days at a time and then you are required to leave Country Y.

We consider that the above facts indicate that you will maintain continuity with Australia for the financial years included in this ruling.

Nationality

The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case.

You and your spouse are Australian citizens and you were both born in Australia.

You and your spouse intend on applying for a self-funded visa for Country Y. A self-funded visa is for a maximum period of 10 years.

Until this visa is granted you are only able to be present in Country y for 30 days at a time then you are required to leave Country Y.

You will not become a citizen of Country Y.

History of residence

In Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (Iyengar's case), the Tribunal noted that both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident (for taxation purposes) in a country in a particular income year.

You were born in Australia and are a citizen of Australia. Your family lives in Australia.

You intend on being physically present in Australia for approximately xxx days each year and your spouse will be physically present in Australia for approximately xx days each year.

In light of the above and consistent with the principles established in the Iyengar's case, your history of residence and movements will not be consistent with someone who is no longer residing in Australia.

Habits and "mode of life"

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.

You have lived with your family in Australia for the majority of your life.

You have gone to country y with the intention on living and running a business in Country Y.

You have purchased a lease on some land in Country Y.

You are leasing a property on a month by month lease in Country Y.

You have your home in Australia which will be rented out and an investment rental property.

You will return to Australia to stay while your spouse is in Country Z working. You will be in Australia for approximately xxx days waiting for your spouse to return.

Based on the above, we do not consider anything about your habits and mode of life during the financial years included in this ruling will be inconsistent with you being a resident of Australia for taxation purposes.

Frequency, regularity and duration of visits to Australia

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who 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 to be residing in Australia.

Every xx days you will be in Australia when your spouse goes to work.

You will be in Australia for approximately xxx days while your spouse is working in Country Z.

Your spouse will be in Australia for xx days on their way to and from Country Z.

When considering the issue of return visits to Australia by a taxpayer who was living and working overseas, the Tribunal in Iyengar's case also noted that the brevity of a visit to a particular country compared to length of time spent abroad does not of itself exclude an individual from being a resident in the country visited. Further, 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 and was also considered to be a resident of Australia for income tax purposes.

Considering the above, we do not consider the duration of your return trips to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes in each of the income years included in this ruling.

Purpose of visits to or absences from Australia

The details of your intended return trips to Australia during the financial years included in this ruling are discussed above. As stated, we do not consider the brevity of those trips precludes you from being considered a resident of Australia for taxation purposes and the fact that you and your spouse intend to use these trips to visit family and as a stop over for your spouses way to and from Country Z is a clear indication that you intend to continue to maintain a continuity of association with Australia during the years in question.

Family and business ties to Australia and the overseas country or countries

Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident.

Family

Your spouse has accompanied you to Country Y. All other family including children, grandchildren and parents in law are still in Australia.

You will return to Australia on a regular basis staying in Australia for the period your spouse is working in Country Z.

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 both had family 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.

Consistent with the findings in Case 5/2013 and Iyengar, and the definition of family provided by the Macquarie Dictionary the fact that your children and grandchildren will continue to permanently reside in Australia indicates the strength of your family ties to Australia.

Your family ties in Australia are strong and you intend to visit and stay with them in Australia on a regular basis.

Business or economic ties

You have lived in Australia up until you left for country Y.

You have properties in Australia which derive rental income.

Assets

You have properties in Australia which are being rented out.

At present you have not purchased any assets of any significance in country Y.

You have purchased a lease on xx acres of land.

Your case is simular to the taxpayer in the Iyengar case where the taxpayer was found to be a resident of Australia for tax purposes. In that case the taxpayer did not purchase substantial property whilst overseas, but retained assets in Australia.

Maintenance of Place of abode

The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer.

You have chosen to rent your family home out for the duration of your stay in Country Y rather than sell it.

Summary

As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically;

· You can only be in Country Y for 30 days at any one time then you are required to leave.

· You intend on applying for a self funded residents' visa.

· You will return to Australia for the period of time your spouse is working in Country Z which means you will be in Australia for approximately xxx days.

Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period.