Edited version of your private ruling

Authorisation Number: 1012519609986

Ruling

Subject: Residency

Questions and answers

1. Are you a resident of Australia for tax purposes?

Yes.

2. Is your spouse a resident of Australia for tax purposes?

Withdrawn.

This ruling applies for the following periods:

Year ended 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

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 and are a citizen of Australia.

You have not been granted permanent residency of any other country.

You have not lodged tax returns in any other country.

Your country of origin is Australia.

Your spouse is a citizen of another country with permanent residency status in Australia.

You are retired and spend a large amount of time in another country.

You have no ownership rights in this other country and you are not registered as a resident.

You sold your main residence in Australia.

After settlement you and your family resided in another property in Australia.

You departed Australian to travel to another country with your spouse.

While you were in another country your household effects were put into storage.

You returned to Australia for a number of reasons.

You purchased another residence in Australia.

This property was furnished with new items and items that had been held in storage.

This property is not rented while you are travelling and it is not occupied otherwise in your absence. Your intention is to maintain this property for your sole occupancy.

You departed Australia for this other country and you have a return ticket for a later date.

You hold several bank accounts.

In Australia you have a motor vehicle and other assets.

Your spouse owns property in another country.

You hold a driver's license in another country.

You have a bank account in another country.

You do not have any investments in another country.

Neither you nor your spouse earns income from sources outside of Australia.

In a recent year you entered this other country on a spouse of returning citizen visa.

In another year you entered this country on a tourist visa which is extendable.

Your visa does not allow you to remain permanently in this country.

You intend to travel to Australia from this country a number of times a year to live in your Australian residence.

You have no sporting ties or interests with Australia but you maintain a small circle of close friends and family.

You have no sporting ties or interests with this other country but you maintain some expat friends and family from this country.

You intend to spend most of your time in Australia and less time in this other country.

You do not intend to make your permanent home outside of Australia.

You hold a return airline ticket.

You did advise the Australian Electoral Office to have your name removed from the electoral role as you did not have a permanent address in Australia.

You have subsequently re-applied to the Australian Electoral Office.

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 resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 (Miller's case) at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word "reside".

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant (Case 5/2013 (2003) AATA 394, paragraph 49):

· 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 Australia and the other country; and

· maintenance of a place of abode.

To determine whether or not you were residing in Australia for taxation purposes during the years in question, it is necessary for us to examine each of these factors in the context of your circumstances.

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

Physical presence in Australia

A person does not necessarily cease to be a resident of a particular place just 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 (Joachim v Federal Commissioner of Taxation 2002 ATC 2088, at 2090).

You return to Australia for regular visits.

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.

In your case you have been living in another country until you return to Australia at a later date.

You intend to return to Australia a number of times a year to live in the residence that you own here, this residence is maintained for your sole occupancy. You do not intend to make your home permanently in another country.

We consider that the facts the above indicate that you will maintain continuity with Australia during 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 a factor that is considered along with all of the circumstances of each case.

You are an Australian citizen and you have not indicated that you will seek citizenship of any other country.

History of residence and movements

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. You have retired and elected to have an extended holiday in another country.

In light of the above and consistent with the principles established in the Iyengar 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"

It is acknowledged that it is your intention to holiday in another country for extended periods of time, as you will be in another country on a tourist visa you are unable to reside permanently there.

It should also be noted that during the years included in this ruling you intend to continue to maintain your family ties by visiting Australia regularly.

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

In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that mere fact that visits to a country are of short duration does not of itself exclude residence in that country.

During the financial years included in this ruling you intend to regularly return to Australia. You have indicated that it is not your intention to reside permanently overseas but simply to have extended holidays in another country.

Considering the above, we do not consider that the duration of your intended 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 intend to use these trips to visit family is a clear indication that you intend to continue to maintain a continuity of association with Australia during the years in question.

With regard to the purpose of your absence from Australia, your circumstances indicate that your absence from Australia is for the purpose of spending time in another country as you are retired and your spouse's family reside in this other country. It is your intention to maintain your property in Australia for your sole occupancy.

In light of the above, we consider that the purpose of your visits to Australia and absences from Australia is sufficient to preclude you from being considered a non resident of Australia for taxation purposes in each of the income years included in this ruling.

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

Family

You have a family in Australian and in another country. You choose to spend large proportions of the year in another country as you are retired and your spouse's family reside in this other country.

Your family in Australia will continue to reside in Australia whilst you are in another country.

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 in Australia will continue to permanently reside in Australia indicates the strength of your family ties to Australia.

Your spouse and children reside in another country as your spouse's family reside. You intend to spend most of your time in Australia with your spouse and less time in another country as your children grow older.

You have listed that there are many reasons for returning to Australia.

You have strong family ties in both Australia and this other country.

Business or economic

Your main residence is in Australia and you maintain your Australian bank accounts.

You receive your superannuation salary into an Australian bank account and you do not earn any income from sources outside of Australia.

You do not have any business or economic ties in this other country.

Your business or economic ties are therefore significantly stronger in Australia than they are in this other country for the years included in this ruling.  

Assets

You have many assets in Australia, whilst in this other country you have fewer assets.

From the information that you have provided you have stated that you are unable to purchase property in this other country as you are not a resident of this country.

The fact that you are unable to purchase any property in this country, while continuing to maintain your assets in Australia is not consistent with a person who is intending to reside in that country indefinitely. This view is consistent with the findings in the Iyengar case, where the taxpayer was found to be a resident of Australia for income tax purposes.

Maintenance of place of abode

While you are in this other country you are living in accommodation that is owned by your spouse.

You maintain a permanent residence in Australia that is maintained for your sole occupancy.

Conclusion

While you are spending extended periods of time in another country you are maintaining a place of abode in Australia.

In addition to the above your visa does not allow you to remain permanently in this country.

Based on a consideration of all of the factors outlined above, it is concluded that you are a resident of Australia under the resides test for income tax purposes.

The domicile test

If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. From the information that you have provided, you have indicated that you will not seek to become a citizen or permanent resident of another country and you will remain a citizen of Australia. Therefore it is considered your Australian domicile will remain unchanged.

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

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 circumstances:

· You left Australia to travel to another country.

· You were born in Australia; therefore your domicile of origin is Australia.

· You maintain a residence in Australia for your sole occupancy

· You are paid into an Australian bank account.

· You receive a superannuation salary.

· You have not been granted permanent residency by any other country.

· Your visa does not allow you to stay permanently in this other country.

· You have not lodged tax returns in any other country.

· You have no intention to make this other country your home indefinitely.

· You have family in Australia.

· While you are in this other country you stay in accommodation that is that is owned by your spouse. As you are not a resident of this country you are not entitled to own property,

Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour will not be consistent with someone establishing a permanent place of abode outside of Australia. Although it is your intention to reside in this other country for extended periods of time you enter this country on a tourist visa that does not allow you to remain permanently.

Accordingly, as your Australian domicile will remain unchanged and the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia, you are a resident of Australia for income tax purposes under the domicile test.

Your residency status

As it has been established that you are a resident of Australia under both the resides test and the 'domicile test' there is no need to consider the remaining two tests.

As you are a resident of Australian for tax purposes, according to Section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.