Edited version of private advice

Authorisation Number: 1012618573945

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods

Year ended 30 June 2013

The scheme commences on

1 July 2012

Relevant facts and circumstances

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

You have been mainly working overseas for decades. You have not spent any considerable time in Australia during that time.

Your employment in Country X has lasted for many years with the same employer and the contract has been renewed on a yearly basis.

Your current contract in Country X has commenced and is to end in approximately a year. You anticipate that the employment will continue beyond the timeframe of this contract.

You hold a visa that allows you to stay in Country X. However, the visa will only be valid if you keep your employment in Country X. If you cease employment in Country X, you will have to apply for a tourist visa to stay. A tourist visa does not allow you to stay in Country X permanently.

You have a Country X drivers licence and resident card. You have held them for over z years.

You hold a tourist visa to enter Country Y. The visa does not allow you to stay in Country Y permanently.

Your purpose of being in Country X is for work/business.

Your purpose of being in Country Y is to have a rest when off work from Country X.

You have a spouse and children.

Your spouse and children did not accompany you overseas, because your children did not want to leave their current school and your spouse stayed with them.

In Country X, you live in employer provided on-site accommodation.

In Country Y, you live in a house which is owned in your spouse's name. You spent less than a month in Country Y for the year.

Your intention is to continue working in Country X indefinitely and not to return to Australia. You made this decision in 2012.

You do not have an employment position held open for you in Australia.

You return to Australia twice a year on average to visit your spouse and children. You stay for about one week each time.

Your Australian assets include a house, which is currently occupied by your spouse and children, an investment property, bank accounts and managed funds.

You have a mortgage over the property/ies you own in Australia.

All of your salary is sent back to Australia to maintain the mortgage and cover the living expenses of your spouse and children.

You do not have assets overseas.

You have no social or sporting connections with Australia.

You have no social or sporting connections with Country X.

You have no social or sporting connections with Country Y.

You have not advised the Australian Electoral Office to have your name removed from the election toll, but you plan to do so.

You have not advised any Australian financial institutions or investment companies that you are a foreign resident because you are not sure about your residency status in Australia.

You have not advised Medicare or your private health insurer to have your name removed from their records.

On the Australian migration outgoing passenger card, you always state your reason for going overseas is "Business".

Neither you nor your spouse has ever been employed by the Australian Commonwealth Government.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Domicile Act 1982

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 have been working in Country X for many years. On average you return to Australian twice a year to visit your spouse and children and stay for about one week each time.

Although you will not be physically present here while you are working in Country X, 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 an Australian citizen.

(iii) History of residence and movements

You were born in Australia. You have been mainly working overseas for decades. You have not spent any considerable time in Australia during that time. You have been working in Country X for many years.

(iv) Habits and 'mode of life'

You are living in employer provided accommodation in Country X and you:

• are on a visa which only permits you to stay in Country X while your employment contract continues;

• spend some but limited time in Country Y when you are off work from Country X;

• while in Country Y, live in a house, which is owned in your spouse's name;

• are on a tourist visa to enter Country Y and the visa does not allow you to stay permanently in Country Y;

• have a spouse and children, and your spouse and children did not accompany you to Country X, or Country Y;

• have your family home in Australia which is occupied by your spouse and children;

• send back all your salary to Australia to maintain your mortgage and cover the living expenses for your spouse and children;

• do not have social or sports connections with Country X, or Country Y.

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

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

On average you come back to Australia twice a year to visit your family, for about one week each time.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is to work in Country X, subject to future visa approvals and extensions. The purpose of you going to Country Y is to have a rest when off work from Country X.

(vii) Family, business and financial ties

Family

Your spouse and children are living in Australia. They live in your established home. Your children are attending schools in Australia.

Business or economic

You have an employment contract in Country X which has been annually renewed for many years. You do not have an employment position held open for you in Australia. You send all your salary back to Australia to maintain the mortgage on your property/ies and cover the living expenses for your spouse and children.

Assets

Your assets in Australia include a house which your family occupies, an investment property, bank accounts and managed funds. You do not have any assets in Country X. The house in Country Y is owned by your spouse.

It is evident that your immediate family tie is in Australia, you have stronger financial ties with Australia than Country X or Country Y, and you have a higher value of assets in Australia than Country X or Country Y.

(viii) Maintenance of a place of abode in Australia

Your accommodation in Country X is provided by your employer. You will not be able to stay in that accommodation if you cease employment.

Your family home in Australia is occupied by your spouse and children for the duration of your work in Country X and off-work time in Country Y. You send back all your salary to maintain the mortgage on the property and cover the living expenses of your family.

You are effectively maintaining a place of abode in Australia, even though you are not physically living in that place when you are working in Country X.

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 indefinitely, 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 X is dependent on your continuing employment;

• your tourist visa does not allow you to stay in Country Y permanently;

• you are an Australian citizen;

• your immediate family tie is in Australia, you have stronger financial ties to Australia than with Country X or Country Y; and

• you have maintained your family home in Australia and been sending back all your salary to support the home and your family.

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.

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may adopt a domicile of choice. 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 (e.g. applying for citizenship or permanent residency).

Your domicile of origin is Australia. You have not indicated that you have changed or are going to change your domicile. You are not able to become a permanent resident of Country X as your visa does not allow you to remain in Country X beyond your work contract. Further, you are not a permanent resident or citizen of Country Y.

Your domicile is therefore 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.

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 an employer sponsored visa which only allows you to be in Country X for the duration of your work contract; and

• your employer supplies your accommodation in Country X;

• you are on a tourist visa when entering Country Y.

The nature of your accommodation is not permanent in Country X as it is supplied by your employer and your presence at this accommodation and in Country X is contingent on your employment. If you leave your employment or your employment is terminated, you are not able to remain living in Country X or at this address.

Your presence is not permanent in Country Y as your tourist visa does not allow you to stay in Country Y permanently. You are unable to establish a permanent place of abode due to the temporary nature of your presence.

You are a resident under this test.

Your residency status

As you meet the resides and domicile tests of residency, you are a resident of Australia for tax purposes for the income tax year.