Edited version of your private ruling

Authorisation Number: 1012604234591

Ruling

Question 1

Will you be a resident of Australia for taxation purposes for the period you are working overseas?

Answer

Yes

Question 2

Are you required to declare income derived overseas in your Australian tax return?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

The scheme commences on

1 July 2013

Relevant facts and circumstances

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

Your spouse was born in Australia and is a citizen of Australia.

You are going to Country Y for three years to work.

You will live in employer provided accommodation for the period you are working in Country Y.

Your employer obtains both your visa and resident permit on your behalf.

You are only able to be in Country Y for the duration of your employment under the terms and conditions of your visa and resident permit.

Your spouse will accompany you to Country Y.

Your spouse will return to Australia to visit family.

You own real estate in Australia and you will derive income from the real estate.

You will rent out your family home while you are in Country Y.

You will return to Australia annually for a month at a time. This trip will be paid for by your employer and is part of your employment contract.

You have no assets overseas.

You state that you will put on the outgoing passenger card when leaving Australia that you are an Australian resident departing temporarily for at least three years.

Neither you nor your spouse have ever been Commonwealth government employees.

You are over 16 years of age

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' and 'permanent place of abode' 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.

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 gone to Country Y for work purposes.

You will return to Australia annually for one month.

Your spouse will return to Australia to visit family.

Although you will not be physically present here while you are working in Country Y, 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 you are a citizen of Australia.

(iii) History of residence and movements

You lived and worked in Australia prior to taking up the work contract in Country Y.

(iv) Habits and 'mode of life'

You intend to live and work in Country Y for the duration of your employment.

You will live in employer sponsored accommodation in Country Y.

You are on an employer sponsored visa for the duration of your employment. This visa only permits you to be in Country Y while you are working and have a contract to work.

Your spouse will accompany you to Country Y.

You will return annually to Australia.

It is considered that you still have a continuing association with Australia which is consistent with someone who is still residing in Australia.

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

You have stated that you will return annually for one month at a time to Australia.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is to work in Country Y, subject to future visa approvals and extensions.

(vii) Family, business and financial ties

Family

Your spouse will accompany you to Country Y.

Business or economic

As mentioned above, you have taken up an employment contract in Country Y.

Assets

Your assets in Australia include the family home which is being rented out while you are in Country Y and a rental property.

You do not have any assets in Country Y.

It is evident that you have a higher value of assets in Australia than Country Y.

(ix) Maintenance of a place of abode in Australia

You will rent out your family home in Australia for the duration of your employment in Country Y.

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, there are various factors that indicate that you have not ceased to be a resident of Australia. These are primarily:

• you have a restrictive visa whereby your ability to live in Country Y is dependent on your continuing employment;

• you are an Australian citizen;

• you will return to Australia annually for a month; and

• you have stronger financial ties through your assets to Australia than with Country Y.

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 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 to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Australia.

A domicile of choice is adopted when you become a citizen of a new country or apply for permanent residency in a new country.

Your resident permit and visa do not allow you to remain in Country Y beyond your work contract.

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.

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 a person intends to live for the rest of his or her life.  An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia for the following reasons:

• You have a employer sponsored visa and resident permit which only allows you to be in Country Y for the duration of your employment.

• You live in employer sponsored accommodation in Country Y.

Your accommodation in Country Y is not permanent as your presence in Country Y is contingent on your employment.

If you leave your employment or your employment is terminated you are not able to remain living in Country Y.

You are a resident under this test.

As you meet the resides and domicile tests of residency, you are a resident of Australia for tax purposes for the income tax years ending 30 June 2014, 30 June 2015 and 30 June 2016.

You are required to declare your income derived in Country Y in your Australian tax return.