Edited version of your private ruling

Authorisation Number: 1012519308286

Ruling

Subject: Resident of Australia for tax purposes

Question and answer

Are you a resident of Australia for tax purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

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 are an Australian citizen.

Your country of origin is Country X.

You departed Australia for Country X in the year ending 30 June 20XX.

You have a spouse who will accompany you to Country X.

You intend to live in Country X for 1 to 2 years.

You have a Visa for Country X that does not allow you to stay there permanently.

You have a return airline ticket from Country X to Australia.

Your purpose for going to Country X is to visit family.

You have no assets in Country X.

You have a residential dwelling in Australia.

Your residential property is unavailable to you as it is being rented.

You sold the majority of your house hold belongings and gave away the remainder prior to departing.

You have Australian bank accounts.

In Country X you will be staying with family.

You have a business in Australia, you own a business with a friend and you are a director of this business.

You have not removed your name from the electoral role.

You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted.

At the time of departure you indicated on your passenger card that you were departing to visit family.

You have not advised Medicare or health insurance provider to have your name removed from their records.

You have not lodged tax returns in any countries other than Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5 and

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'.

Recent case law decisions have expanded on the list of factors identified in Taxation Ruling TR 98/17: Income tax: residency status of individuals entering Australia.  Case 5/2013../../UA8PU$/imgview/Local Settings/Temporary Internet Files/Resident LRD Smith.doc - _ftn2#_ftn2#_ftn2#_ftn2 [2013] AAA 394; 2013 ATC 1-054 (Case 5/2013) and Sneddon v FC of T [2013] AATA 516; 2012 ATC 10-264 (Sneddon's case), 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. 

(i) Physical presence in Australia

As indicated in Iyengar v FC of T [2011] AATA 856; 2011 ATC 10-222 (Iyengar's case), there is a requirement that you at least be physically present in Australia for part of an income year.

You have been present in Australia until you departed for Country X in the year ending 30 June 20XX. You were born in Country X however you are an Australian citizen; you have been living and working in Australia up until your departure, you also have a return ticket for 12 months after you leave Australia to come back to visit. You intend on permanently returning to Australia in 2 years.

(ii) Nationality

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

(iii) History of residence and movements

In 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 left Australia in the year ending 30 June 20XX and will returned in the year ending 30 June 20YY, during this time you will return to Australia for a holiday.

(iv) Habits and "mode of life"

Unlike the taxpayers in Iyengar's case and Sneddon's case who worked overseas after accepting offers from new employers, you are visiting Country X to see family.

You have not had your name removed from the Australian electoral roll; you own a house in Australia that was your main residence before leaving for Country X, you own a business in Australia and have a return airline ticket which is indicative of you residing in Australia. At the time of departure you indicated on your passenger card that you were departing on a temporary basis to visit family.

You intend on staying with family in Country X in the year ending 30 June 20XX for a period of 2 years.

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

You have not returned to Australia since you departed Australia. Your visa does not allow you to stay in Country X permanently. You have a return ticket to Australia for 12 months and you intend to come back permanently in 2 years.

(vi) Purpose of visits to or absences from Australia

As indicated above, the reason for your absence from Australia is to visit family in Country X.

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

Family

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.

You have a spouse that will accompany you to Country X. You have parents who live in Country X.

Business or economic

In terms of 'business' or economic ties, you own a business with a friend in Australia, you act as a director for that business.

(viii) Maintenance of place of abode

You have a residential property in Australia that is not available to you due to you renting it out.

Summary

Based on the factors listed above, we consider that you were residing in Australia. You have a 'continuity of association' with Australia as you have a business in Australia; you have a Visa that does not allow you to stay permanently in Country X; at the time of departure you indicated on your passenger card that you were departing on a temporary basis and you have not removed your name from the electoral role and have not advised Medicare or health insurance provider to have your name removed from their records.

You are only departing Australia temporarily and intend to return to Australia.

You are residing in Australia according to the ordinary meaning of the word.

Therefore, you are a resident of Australia under this 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 is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

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 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 of origin is Country X, however your domicile of choice is Australia, you no longer have Country X citizenship, you live and work in Australia and you are an Australian citizen. There is no indication that you intend to give up your Australian citizenship or intend to take up Country X citizenship.

As your domicile is Australia you will be a resident under this test unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

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:

(a) the intended and actual length of the taxpayer's stay in the overseas country;

(b) 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;

(c) 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;

(d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(e) the duration and continuity of the taxpayer's presence in the overseas country; and

(f) 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.

In your case, the Commissioner is not satisfied that you have a permanent place of abode outside of Australia for the following reasons:

· You are only visiting family in Country X rather than living there permanently.

· While in Country X, you are staying with your parents.

· Your visa does not allow you to permanently stay in Country X.

· You have a business in Australia.

· You have a house here that was your main residence prior to your departure.

· You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted.

· You have not removed your name from the electoral role.

· At the time of departure you indicated on your passenger card that you were departing on a temporary basis.

Therefore, as your domicile is Australia, and the Commissioner is not satisfied that you have a permanent place of abode outside of Australia, you are a resident of Australia under this test.

Your residency status

As you meet the Resides test and the Domicile test, you are a resident of Australia for tax purposes.

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.