Edited version of your private ruling

Authorisation Number: 1012573641666

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Ruling

Subject: Residency status

Questions and answers:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following period:

Year ending 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

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

You had a spouse and a dependant.

You have been employed as an offshore worker for many years.

You have had a number of employers.

During the 2012 -13 income year you were employed in a number of countries for a combined number of days greater than 183.

The reason that you included on your outgoing immigration cards were that you were leaving for work purposes.

You also undertook some personal overseas travel for short periods.

For each of the countries that you were employed in you were provided with work/residency visa's by your employers. The visa's allowed you to remain in the respective country for a period of one year.

In each of the countries that you were employed in your employer provided you with accommodation or reimbursed you for any out of pocket expenses.

The remuneration that you derived from your overseas employment was paid mainly in foreign currency into a foreign bank account.

You used your foreign sourced income to pay off your Australian mortgage and support your dependant.

You returned to Australia on a number of occasions for extended periods when you were in between jobs or on recreation leave. During these periods you returned to your home and family in Australia.

Your assets in Australia consist of your family home and a motor vehicle. In addition you have house hold and personal items.

Your personal items have been boxed and placed in a shed at your home. Your household items have remained in your home.

You do not own any assets overseas.

You do not have any sporting or social ties in either Australia or overseas.

You did advise the Australian Electoral Office, Medicare or any financial institutions that you were departing Australia.

Neither you nor your spouse have been a Government of Australia Employee.

During the 2012-13 income year, you were out of the country for a period of greater than 183 days.

You are undecided on whether you wish to reside out of Australia indefinitely.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Residency

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the 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 NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia.

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 satisfy the conditions of one of the other three tests.

The resides test

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.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia, identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes.

According to paragraph 20 of 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 5/2013 and Sneddon v FC of T (Sneddons 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).

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).

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. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (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 employed as an offshore worker for many years. In the 2012-13 you have returned to Australia on a number of occasions during rest and recreational periods or in between jobs. The periods that you were in Australia were spent in your home with your family.

It is acknowledged that you were overseas for a period greater than 183 days during the 2012-13 income year. However consistent with the principles established in the Iyengar's case, we consider that the periods that you were present in Australia were sufficient to demonstrate that you were maintaining an ongoing continuity of association with Australia in the 2012-13 income year.

Nationality

In Iyengar's Case, it was noted that in most cases, the nationality of a person would not be a factor to be taken into account along with other circumstances in determining where his or her residence is. However, in cases that could go either way, the citizenship of a person may not be completely irrelevant in the conclusion to be drawn from all the relevant facts

In your case, you were born in Australia and are a citizen only of Australia. From the information that you have provided your visa's allowed you to remain in countries where you exercised your employment for a period of 1 year. Further you have not indicated whether you have sought a more permanent residency status in any of these countries.

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. Significant in Iyengar's Case is that when he fulfilled a long term overseas employment opportunity he would return to his home in Australia for a break before leaving Australia and taking on another overseas employment opportunity.

In your circumstances, you were born in Australia and have worked as an offshore worker for many years. Your movements are such that they are purely based on the location of your employment. Once you complete an employment assignment or are on recreation leave you return to your home in Australia for a break, before recommencing or taking on a new employment opportunity.

Your circumstances are identical to the taxpayer in Iyengar's Case who was found to be a resident of Australia for tax purposes. The fact that your movements are dictated by where your employment opportunities are adds significant weight to the conclusion that your movements are dependent on employment opportunities rather than a desire to leave Australia indefinitely.

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

Habits and "mode of life"

In recent cases a taxpayer's habits and mode of life in the country where they are/had been living were considered when determining whether a taxpayer continued to be a residence of Australia for income tax purposes.

In Sneddon's Case, the taxpayer who was found by the court to be a resident of Australia for tax purposes lived in a fully-furnished apartment leased by his overseas employer. The taxpayer's only expenses were his every day living expenses and some furniture and household items that he purchased to make the fully-furnished apartment, provided by his employer more comfortable. Further his employment income was paid in Australian dollars into an Australian bank account and predominantly used to meet his Australian obligations.

Your case is similar to the taxpayer in Sneddon's Case in that in all the countries that you were employed in your employer provided you with your accommodation. While it is acknowledged that the remuneration that you received from your overseas employment was paid into a foreign bank account in foreign currency, similar to the taxpayer in Sneddon's Case you have used the income that you have derived overseas to meet your Australian obligations in terms of your mortgage and support of your dependant. Further you do not have any sporting or social ties in any of the countries that you have been employed in.

In considering the above and consistent with the finding in Sneddon's Case, your habits and mode of life are not consistent with someone who has ceased to be a resident of Australia for tax purposes

Frequency, regularity and duration of visits to Australia

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

As previously discussed, 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's Case 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 a resident of Australia for income tax purposes.

In your case, in the income year in question you have returned to Australia on a number occasions for extended periods to be with family.

Considering the above and the principles established in Iyengar's Case and Lysaght's Case, we do not consider the frequency, regularity and duration of your visits to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes in the 2012-13 income year.

Purpose of visits to or absences from Australia

In Iyengar's Case, the evidence was that Mr Iyengar's intention was to go to Dubai (and later Doha) and work for Maersk for as long as it took to complete his contract and then to return to Australia, which he did. His motivation for doing so was to use the money he earned under the contract to pay down the mortgage on the Winthrop home as soon as possible. Such an intention (and motive) is indicative that Mr Iyengar was an Australian "resident" in the relevant period.

In considering the purpose of your absences from Australia, you have stated that your absences from Australia were for work purposes with the exception of a couple short holidays. When departing Australia you stated on your Immigration outgoing card that you were leaving Australia for work purposes. In contrast when you returned to Australia you stayed with your family in your family home. Further the income that you derived overseas was used in part to pay down your mortgage.

In light of the above, your actions demonstrate that your movements are dictated by employment opportunities, while visits to Australia were for the purpose of resuming your ties with your family.

Therefore, consistent with the principle established in Iyengar's Case, these actions were 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, assets, business ties to Australia and the overseas country or countries

In Iyengar's Case, the court held that, despite the fact that Mr Iyengar spent almost 2 years and 7 months working in Dubai and later Doha for Maersk, his family ties with Australia were such that he remained a "resident of Australia" in the relevant years of income. That is, after moving to Australia from India in 1998 he and his family took the step of becoming Australian citizens 2003 and acquiring a home in about 2003. While he was overseas working on the Contract for Maersk, his wife, daughter and son remained in Australia (except for three short visits to Dubai by his wife), his most substantial asset (the Winthrop home) was located in Australia, he used almost all of the money he earned abroad to make accelerated payments on his Australian mortgage on the Winthrop home (which he acknowledged he considered to be the "family home") and he took his holidays (albeit short) in Australia at the Winthrop home with his family: Shand and Crockett.

Your circumstances are identical to those of the taxpayer in Iyengar's Case. Your family ties are far stronger in Australia than they are in any of the countries that you were employed in. You acquired a home in Australia where your family resided in and you returned to in between assignments or when on rest and recreational periods. Your home in Australia remains your most substantial asset and you have used the remuneration from your overseas employment to pay down your mortgage. In contrast you have no assets overseas.

In applying the principles established in Iyengar's Case to your particular circumstance, your family, assets and business ties to Australia preclude you from being a non resident of Australia for tax purposes.

Maintenance of Place of abode

In Iyengar's Case, the court held that another important factor in determining whether or not a person has ceased to be resident in a particular country is whether the person maintains a 'place of abode' in that country, whether owned by them or not, when they are absent from that country. In Australia, the maintenance of a home in a particular place has usually arisen in relation to the question whether the taxpayer had a "permanent place of abode" outside Australia within the meaning of the first statutory test (the domicile test) in section 6(1)(a)(i) of the ITAA 1936.

In your case, you have maintained place of abode in Australia in terms of your family home. Further your family continues to reside in this home and your household possessions and personal effects also remain in this home. When you were on rest and recreation breaks or in between employment opportunities you returned to this home. In contrast when you were overseas your employer provided you with accommodation in each of the countries that you were employed in.

In light of the above it is considered that you maintained a place of abode in Australia and did not establish a place of abode outside of Australia. These actions are not consistent with someone who has ceased to be a resident of Australia for income tax purposes.

Conclusion

It is acknowledged that you were out of Australia for a period greater than 183 days.

With regards to the remaining factors and the findings in recent case's including Sneddon's Case, Iyengar's Case and case 5/2013, all of whom were found to be residents of Australia for income tax purposes the following are significant. You have returned to Australia on a number of occasions for significant periods to be with your family. You have remained an Australian citizen and have not demonstrated any intension to gain a more permanent visa in any of the countries that you have worked in. Further your employer has provided you with any required visa's. Your ties in terms of family and material assets are far more substantial in Australia than overseas, and you are continuing to service the growth of your Australian assets through transferring a portion of your overseas remuneration to Australia to service your mortgage. You depart Australia exclusively for work purposes and return to Australia to resume your ties with your family etc. Significant is that you have continued to maintain a place of abode in Australia that you returned to when you were not working. In contrast while overseas you lived in employer provided lodgings.

In consideration of all of the factors outlined above, it is concluded that you will continue to be a resident of Australia under the 'resides test' for income tax purposes.

Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument.

The domicile test

If a person domicile is 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. In your case you were born in Australia and therefore your domicile of origin is Australia. From the information you have provided you have not demonstrated any intention of becoming a citizen of any of the countries that you were employed in, therefore your Australian domicile remains 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.

Your circumstances are as follows:

· you have been employed as an offshore worker for many years;

· you departed and returned to Australia on a number of occasions;

· you left Australia for employment purposes and returned for family reasons;

· the nature of your employment is such that you work in one country and when your work has been completed you move onto the next country;

· you worked in a number of overseas countries;

· while overseas you lived in employer provided accommodation;

· you are uncertain whether you intend to depart Australia and live overseas permanently;

· in each of the countries that you have been employed in your employer provided you with the appropriate visa;

· you maintained a place of abode in Australia that you returned to during employment breaks;

· you do not have any assets overseas;

· your assets in Australia consist of your family home, home furnishings, personal items and a motor vehicle; and

· you did not inform any Government authorities, financial institutions etc. that you were departing Australia for an indefinite period.

Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour is not consistent with someone establishing a permanent place of abode outside of Australia.

Accordingly, as your domicile is Australia and the Commissioner is not satisfied that you have establish a permanent place of abode outside of Australia, you will be a resident of Australia for income tax purposes under the 'domicile test'.

Conclusion

As it has been established that you will continue to be a resident of Australia for income tax purposes under the resides test and the domicile test, there is no need to consider the remaining 2 tests. Therefore you will continue to be a resident of Australia for income tax purposes for the income years included in this ruling under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.