Edited version of your private ruling

Authorisation Number: 1012603227312

Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commences 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 were born in Australia and are a citizen of Australia.

You have a spouse, adult children and a dependent child.

You were offered an employment in country Q with a country Q based company for an extended period.

In accepting the employment opportunity, you are required to relocate to country Q for the duration of your employment.

You decided that you wished to permanently reside in country Q after receiving the employment offer.

You departed Australia to live and commence your employment.

You entered country Q on a Work permit visa.

For the years included in this ruling you intend to return to Australia for 1 or 2 business trips annually for short periods.

When you return to Australia you intend to stay in hotels.

Your employment contract contains the following provisions;

4.1 Prerequisite to this agreement is the entire agreement and understanding between the parties for the temporary assignment in country Q, which is dependent on the issuance of a work and residence permit by the authorities of country Q

4.3 This Agreement is for an extended period and will automatically terminate on the date provided. During this term either party may terminate this Agreement by observing a period of notice in writing from the end of the month.

4.4 This Agreement will automatically terminate after the given period, unless the parties have previously mutually agreed in writing upon an extension to be then determined.

You have established rental accommodation in country Q that you were required to furnish with household goods.

Your youngest child who is under 16 years of age is currently completing their education in Australia. As a result your spouse will remain in Australia to care for this child. During periods of school breaks your spouse and child will join you in country Q.

Once you child completes their education in Australia your spouse will join you in country Q indefinitely.

Your overseas assets will consist of a bank account household possessions and a motor vehicle.

Your assets in Australia consist of your family home, investment properties and a number of shares.

You have brought your personal items with you to country Q.

You receive Australian sourced income through rental income and dividends.

Some of the foreign sourced income that you derive may be transferred to Australia at some stage to pay the principle of one of your properties.

Your spouse's Australian income is sufficient support your family in Australia.

You stated on your immigration outgoing passenger card that you are departing Australia permanently to work in country Q.

You do not have any social or sporting ties with Australia.

Your sporting ties with country Q consist of a gym membership. In future you intend to sporting associations in country Q.

Neither you nor your spouse has been a Commonwealth Government of Australia employee.

You have advised the Australian Electoral Commission to remove your name from the electoral roll.

As yet you have not advised Medicare, your health insurance provider or any companies that you have investments of your intention to depart Australia permanently.

You intend to remain in country Q indefinitely.

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.^[4]  

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

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.

Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62):

Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1.

In your case, you have taken up a temporary assignment in country Q for an extended period (contract clause 4.1) with an option for an extension where both parties have come to a mutual agreement (contract clause 4.4). You only intend to return to Australia during this period exclusively for business purposes.

Although you will only return to Australia for business purposes and for short periods, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above.

(ii) Nationality

You were born in Australia and are a citizen of Australia. While you are living and working in country Q you will do so under a country Q Work Permit.

(iii) History of residence and movements

Our records indicate you have lived and worked in Australia until leaving to take up employment in country Q on dd/mm/yyyy.

(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 Iyengar's Case, the taxpayer who was found by the court to be a resident of Australia for tax purposes was employed overseas for an extended period of time. While the taxpayer was overseas their spouse and children remained in their family home in Australia. During this period of overseas employment, the taxpayer had family and friends visit and stay with him at his overseas residence on numerous occasions, was a member of several overseas sporting an recreational associations and dined out frequently as a member of a local hotel group's discount restaurant program. In this case the court found that these activities were normal pursuits for most normal expatriate persons who are employed abroad.

Your case is similar to the taxpayer in Iyengar's Case. You intend to live and work in country Q for an extended period. You have become a member of a gym and intend to establish various sporting ties including joining country Q sporting associations. Your spouse and youngest child will visit you during school vacations.

(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 for business purposes and for short periods.

(vi)  Purpose of visits to or absences from Australia

The purpose of your absence from Australia is to live and work in country Q. When return to Australia it will be exclusively for business purposes.

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

Family

You have a spouse and a number of children. Your spouse and children will continue to live in Australia, with the Australian school holidays when your spouse and youngest child will visit you in country Q. It is evident that you will have stronger family ties to Australia than country Q.

Business or economic

As mentioned above, you have taken up an employment contract in country Q for an extended period.

Assets

Your assets in Australia comprise of your family home, investment properties and a number of shares.

Your assets in country Q consist of household and personal items.

It is evident that you have a higher value of assets in Australia than country Q. Further, the location of your family and the retention of your family home and other Australian assets are consistent with someone who is still residing in Australia.

(viii) Maintenance of Place of abode

You are leasing an apartment in country Q and you continue to own your family home in Australia. Significant is that your spouse and youngest child intend to continue living in the family home, only joining you in country Q during school holidays.

It light of the above you are continuing to maintain a place of abode in Australia.

Conclusion

It is acknowledged that your presence in Australia will be limited to brief trips made for exclusively business purposes. In addition while on these trips you will be staying in hotels and not at your family residence. While working in country Q you will be living in a rented apartment that you were required to purchase household items. Further while in country Q you have obtained gym memberships and intend to establish other various sporting ties.

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 remained a citizen of Australia. Your ties in terms of family and material assets are far more substantial in Australia than in country Q. You are continuing to maintain a place of abode in Australia. Significantly, for the years contained in this ruling your spouse and dependant will remain in Australia and only visit you school holidays.

In consideration of all of the factors outlined above, it is concluded that you will maintain a continuity of association with Australia during the relevant income years and therefore continue to be a resident of Australia for income tax purposes under the 'resides test'.

Whilst 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 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 Australia, and therefore your domicile of origin is Australia. From the information that you have provided you have not indicated any intention of becoming a citizen or permanent resident country Q, 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 an employment contract with a country Q based company for an extended period and with an option for an extension;

• you intend to live in country Q for an indefinite period;

• when you departed Australia the reason you put on your outgoing immigration card was that you permanently departing Australia to work in country Q;

• while in country Q you live in a rented apartment that is not provided by your employer;

• your assets in country Q consist of household and personal items, and a motor vehicle that you intend to purchase;

• your assets in Australia consists of your family home, investment properties and a small parcel of Australian shares;

• you have had your name removed from the electoral role;

• you intend to inform Medicare, your health care provider and any other financial institutions that you have left Australia for an indefinite period;

• your youngest child's place of education remains Australia;

• your spouse will remain in Australia in your family home while your youngest dependant completes their schooling;

• your spouse continues to be employed in Australia; and

• your spouse and dependant will only visit you in country Q on school vacations.

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.

Significant in reaching this conclusion is that while your spouse and dependant continue to live in your family home in Australia, this home has not been abandoned. Your assets are far more significant in Australia than country Q. In terms of family ties, your youngest child's place of education will continue to be Australia and the other members of your immediate family will continue to remain in Australia. In addition your spouse will continue to be employed in Australia and only visit you when your youngest dependant is on school holidays.

Therefore based on the above the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia.

Accordingly, as your Australian domicile will remain unchanged and the Commissioner is not satisfied that you have establish a permanent place of abode outside of Australia, you will continue to be a resident of Australia for income tax purposes in the years that are included in this ruling 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 both 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.