Edited version of your private ruling

Authorisation Number: 1012598077233

Ruling

Subject: Residency

Question and answer

Are you resident of Australia for tax purposes?

Yes

This ruling applies for the following periods:

Year ending 30 June 2010

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

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 2009

Relevant facts and circumstances

Your country of origin is Australia and you are an Australian citizen.

You are not a citizen of any other countries.

The company you were working for ceased operating in Australia and you were offered overseas work with their parent company. Your first project was in Country W.

You and your spouse moved to Country W. You lived in rental accommodation arranged by your employer.

You rented out your house in Australia while you were in Country W.

You worked and lived in Country W for nearly two years.

You were then transferred to work in Country W and have been working there since. You live in rental accommodation arranged by your employer.

Your spouse moved back to Australia to live as it was unsafe to stay in Country X.

You and your spouse purchased a property in Australia which your spouse lives in and you live in when you return to Australia on holidays.

You are being transferred to work in Country Y at your employer's head office for approximately six months. You will live in employer provided accommodation.

You will then be transferred to another long term overseas project in Country Z which is expected to be for the next three years. You will live in employer provided accommodation.

You return to Australia for holidays for two weeks at a time, usually several times a year to visit your spouse and family.

You were a member of a sporting club in Country X.

Your visas while working overseas are temporary resident/work permits.

You intend to return to Australia permanently at the end of your overseas employment which may not be until 2018.

You do not have assets overseas other than a bank account in the country of your employment which you use on a limited basis.

Assets you have in Australia include:

• Your family home

• Two investment properties

• Household effects

• Car

• Superannuation

• Joint bank accounts

You state that the residency test in relation to Superannuation and Commonwealth Government employees does not apply to you.

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 Commonwealth superannuation fund test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation 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 its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

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'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 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:

(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 with Australia compared to the foreign country concerned, and

(viii) maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

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

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

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.

In your case, you have been working and living outside of Australia for the past four years and plan to continue working overseas for the next three years.

You have no plans to return to Australia other than for short holiday trips several times a year for two weeks at a time.

Although you may not return to Australia and may not be physically present here while you are working overseas, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above.

(ii) Nationality

Your country of origin is Australia and you are a citizen of Australia.

(iii) History of residence and movements

You have been living overseas in various countries for the past four years as your employer ceased operating in Australia you were offered employment overseas.

In all of the countries you have worked in your accommodation has been arranged by your employer.

(iv) Habits and 'mode of life'

You intend to live and work overseas for the next four years.

You will return to Australia for holiday visits several times a year for two weeks at a time.

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

As mentioned above, you currently have no plans to make any return visits to Australia other than short holiday visits to visit your spouse who still lives here.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is to work for your long term employer who has a parent company overseas.

You will visit Australia for holidays to visit your spouse and family.

(vii) Family, business and financial ties

Family

Your spouse continues to reside in Australia. Your spouse lived with you in Country W but did not go to Country X with you due to it being unsafe.

It is evident that you have stronger family ties to Australia than overseas.

Business or economic

You have been offered employment on a project in Country Z for the next three years.

Assets

Your Australian assets include:

• Your family home

• Two investment properties

• Household effects

• Car

• Superannuation

• Joint bank accounts

You do not have assets overseas other than a bank account in the country of your employment which you use on a limited basis.

It is evident that you have a higher value of assets in Australia than overseas. Further, the retention of your family home is consistent with someone who is still residing in Australia.

(viii) Maintenance of a place of abode in Australia

You continue to own your family home with your spouse in Australia. Your spouse lives in the home and you stay there when you return to Australia.

As you are maintaining a place of abode in Australia, this is consistent with someone who is still residing in Australia.

Summary of the resides test

As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning.

In your case, although you intend to be physically absent from Australia for at least the next three years and have been overseas for the past four years, there are various factors that indicate that you have not ceased to be a resident of Australia. These are primarily:

• Your visas while working overseas are temporary work permits

• You have worked in various countries since leaving Australia

• Your accommodation while working overseas is arranged by your employer

• You are an Australia citizen and intend to return to Australia permanently when your overseas employment finishes

• Your spouse remains living in Australia in your family home

• You have stronger family ties to Australia than to any other overseas country

• You have stronger financial ties to Australia as all of your assets are in Australia

• You are maintaining your family home in Australia as your spouse lives there and you stay there when you return to Australia for holidays

• You do not have a permanent home available to you overseas

Based on the above, you will retain a continuity of association with Australia while you are overseas and will be residing in Australia according to the ordinary meaning of the word.

Therefore, you are a resident of Australia under the 'resides' test of residency.

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

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

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982).

In this regard, paragraph 21 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) states that:

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

In your case, as you have not obtained a migration visa or become a permanent resident or a citizen of another overseas country you have not established a new domicile of choice in that country.

You are an Australian citizen and your domicile remains Australia.

Permanent place of abode

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 (paragraph 12 of IT 2650).

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 14 of IT 2650).

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.

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

• You have retained your family home in Australia, where your spouse lives and where you stay when you return to Australia

• You are overseas for the primary reason of work as the company you work for no longer operates in Australia

• You have lived in various countries since leaving Australia which has been dependant on where your employer transfers you for work

• Your accommodation overseas is arranged by your employer

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

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.