Edited version of your private ruling

Authorisation Number: 1012604805132

Ruling

Subject: Residency

Question and answer

Were you a resident of Australia for taxation purposes for the period you were in Country Y?

Yes.

This ruling applies for the following periods

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commences on

1 July 2011

Relevant facts and circumstances

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

You do not have permanent residency of any other country.

You were relocated to Country Y a number of years ago by your Australian employer.

Your employer provided your accommodation in Country Y.

Your employer obtained your work visa on your behalf.

The visa was for two years and only allowed you to be present in Country Y while you were employed.

You returned to Australia on numerous occasions for holidays.

Your family accompanied you to Country Y.

You lived in Australia with your parents prior to going to Country Y for work purposes.

You had no assets in Country Y.

You have x houses, x bank accounts and x cars in Australia.

You were renovating one of the houses while you were in Country Y.

All your belongings were held in storage while you were in Country Y.

You were offered positions in Country X and country Z which you refused.

You decided to return to Australia at the end of xxx and returned to Australia in xxx.

You decided to return to Australia so your child was able to access more affordable services in Australia.

You and your spouse have not been a Commonwealth Government of Australia employee.

You are over 16 years of age.

Assumption(s)

N/A

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Further issues for you to consider

N/A

Anti-avoidance rules

The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the MEI low risk PART IVA list as specified in ORCLA.

Reasons for decision

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 went to Country Y for work purposes.

You returned to Australia numerous times for holidays while you were working in Country Y.

Although you were not physically present in Australia while you were 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 intended to be in Country Y for the duration of your work contract in Country Y.

You had a work visa for 2 years which was employer sponsored and was only in existence for the duration of your work contract.

You lived in employer provided accommodation in Country Y.

It is considered that you had a continuing association with Australia and is consistent with someone who was still residing in Australia.

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

You state that you returned on numerous occasions to Australia for holidays during your period of work in Country Y.

(vi) Purpose of visits to and absence from Australia

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

(vii) Family, business and financial ties

Family

Your spouse and children accompanied you to Country Y.

Business or economic

As mentioned above your Australian employer relocated you to Country Y for work purposes.

Assets

You had x houses, x cars and x bank accounts in Australia.

You had no assets in Country Y.

(viii) Maintenance of a place of abode in Australia

You were renovating a home in Australia while you were working 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 intended to be physically absent from Australia, there are various factors that indicate that you did not ceased to be a resident of Australia. These are primarily:

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

• you are an Australian citizen;

• you made numerous visits back to Australia for holidays while you were in Country Y

• you lived in employer provided accommodation in Country Y

Based on the above, you retained a continuity of association with Australia while you were overseas and were 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.

You did not change your domicile while you were in Country Y.

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 had an employer sponsored 2 year visa which only allowed you to be in Country Y for the duration of your employment

• You lived in employer provided accommodation in Country Y

As your accommodation, and your overall presence in Country Y was entirely contingent on your ongoing employment, it is considered that your place of abode is temporary in nature and could not be considered to be a permanent place of abode.

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 period you were in country Y.