Edited version of your private ruling

Authorisation Number: 1012578196228

Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

No.

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 country Y and are a citizen of both country Y and Australia.

You are single.

You migrated to Australia in on a permanent resident visa and later became a citizen of Australia.

After a period you left Australia and travelled to country Y where you spent a number of months visiting your family.

After spending time with your family in country Y you then travelled to country Z to live and work..

You entered country Z on a visa that allows you to remain in country Z indefinitely.

While in country you gained permanent employment and found long term rental accommodation.

Your Australian assets consist of a number of bank accounts with relatively small balances and a superannuation account.

Your overseas are located in country Z and consist of a bank account with a relatively large balance and stocks. You have recently taken out a loan to purchase a motor vehicle.

Since departing Australia you have been transferring the funds contained in your Australian bank accounts into your bank accounts in country Z.

You have not returned to Australia since your departure.

Prior to leaving Australia you lived in rental accommodation.

Your sporting and social ties in Australia consist of friends and colleagues.

Your sporting and social ties in country Z consist of friends and colleagues.

You have not been a Commonwealth Government of Australia employee.

You are uncertain on whether you will remain in country Z or return to Australia; however you intend to make that decision after a number of years living to country Z.

Assumption(s)

Nil

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Further issues for you to consider

Nil

Anti-avoidance rules

Nil

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).

(i) 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 case law taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia.

In your case, you have not returned to Australia since first departing. This pattern of behaviour is sufficient to demonstrate that you did not maintain an ongoing continuity of association with Australia for the income year included in this ruling.

(ii) 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 are a citizen of both Australia and country Y. While in country Z you hold a visa that allows you to remain in country Z for an indefinite period of time.

(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. Significant in Iyengar's Case is that when he for filled 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 country Y and migrated to Australia and gained Australian citizenship. After a period you left Australia and moved to country Z after spending a number of months with your family in country Y. You have remained in the country Z.

Your circumstances are very different to those in Iyengar's Case, particularly given the fact that your movements have been for set periods, you have not returned to Australia post your departure and you do not have a home or family to return to in Australia.

In light of the above and consistent with the principles established in Iyengar's Case, your history of residence and movements are consistent with someone who is no longer residing in Australia.

(iv) 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 your case, since your departure you have remained in country Z where you have been employed fulltime. You live in self provided rental accommodation and have a network of friends. The remuneration that you derive in country Z has remained in country Z and not been transferred to Australia and you have not returned to Australia since your departure.

In considering the above and based on the findings in recent cases, your habits and mode of life are consistent with someone who has eased to be a resident of Australia for tax purposes for the years contained in this ruling.

(v) 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.

In your case, since your departure from Australia you have not returned. Therefore it is considered that the fact that you have not returned to Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes post your departure from Australia.

(vi)  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.

From the information that you have provided you have stated the purpose of your departure from Australia was to live and work in country Z. Since your departure you have not returned to Australia.

In light of the above, your absence from Australia is sufficient to preclude you from being considered a resident of Australia for taxation purposes.

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

In your case, since your departure from Australia (with the exception of a number of months that you spent with your family in country Y) you have been living and working in country Z. You have no family ties in either Australia or the country Z. The assets that you possess in Australia predominantly consist of your superannuation. Your assets in the country Z consist of bank accounts which contain a considerable balance. The income that you derive in country Z has remained in the country Z.

Therefore, based on the above and consistent principles established in recent case law, your family, assets and business ties to Australia preclude you from being considered a resident for income tax purposes.

(viii) 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, during the period that you were in Australia you lived in rental accommodation. When you left Australia you no longer had a home to return to. In contrast since arriving in the country Z you have been living in long term rental accommodation.

In light of the above it is considered that you are not maintaining a place of abode in outside of Australia. This action is consistent with someone who has ceased to be a resident of Australia for income tax purposes.

Conclusion

It is acknowledged that you are a citizen of Australia, however 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 not returned to Australia since first departing. You have not maintained a place of abode in Australia and hold a country Z visa that allows you to remain in country Z indefinitely. You do not have any family or substantial assets in Australia and the remuneration that you derive from your foreign sourced income has remained overseas.

In consideration of all of the factors outlined above, it is concluded that you are not a resident of Australia for income tax purposes under the 'resides test'..

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. In your case you were born in country Y therefore your domicile of origin is Iran. From the information that you have provided, you migrated to Australia and later became an Australia citizen, and in doing so elected Australia as you domicile of choice. You then obtained a country Z visa and moved to country Z. Although you are currently on a visa whilst living in country Z, you have not sought country Z citizenship or a more permanent residency. Therefore your elected 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:

· after migrating from country Y, you left Australia to live and work in country Z;

· while in country Z you have secured full time employment and live in long term rental accommodation;

· since arriving in country Z you have remained in country Z and not returned to Australia;

· you hold a country Z that allows you to remain in country Z indefinitely;

· your assets in Australia predominantly consist of superannuation; and

· you have no family ties in either Australia or country Z.

Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour is consistent with someone who has established a permanent place of abode outside of Australia.

Accordingly, although your Australian domicile remains unchanged the Commissioner is satisfied that you have established a permanent place of abode outside of Australia, therefore you are not a resident of Australia for income tax purposes under the 'domicile test'.

The 183-day test

Where a person is present in Australia for more than 183 days during an income year the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not in Australia for a period greater than 183 days for the income year included in this ruling, therefore you are not considered to be a resident of Australia for income tax purposes under this test.

Accordingly, you are not a resident of Australia for income tax purposes under 'the 183-day test'.

The Superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.  Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

As you are over the age of 16 years and have not, or have you ever been a member of a CSS or PSS you are not a resident of Australia under this test.

Accordingly, you are not a resident of Australia under 'The Superannuation Test'.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not an Australian resident for income tax purposes for the income year included in this ruling.