Edited version of private advice

Authorisation Number: 1012624517624

Ruling

Subject: Residency

Question and answer:

Are you a non-resident of Australia for taxation purposes if you remain living and working overseas?

No.

This ruling applies for the following period:

1 July 2012 to 30 June 2016.

The scheme commenced on:

1 July 2012.

Relevant facts and circumstances:

You were born in Australia and you are an Australian citizen.

You left Australia and moved to another country with your spouse and children (your family).

You moved to the other country because you obtained permanent full time employment in that country.

Your Visa is valid for several years and can only be extended if you remain employed in the other country.

You live in a rental property in the other country with your family.

You would like to stay in the other country for several years but this will depend on a number of factors, including your children's schooling and the health of relatives in Australia.

Since leaving Australia you have retained a professional association with your former Australian employer.

Prior to leaving Australia you were residing with your family in a home (your Australian home) you jointly own with your spouse.

Your Australian home was advertised as being available for rent from the time you left Australia and has been rented out through a real estate agent since it was first let.

Your Australian home has not been available for use by yourself or your family since you left Australia.

When you moved overseas with your family approximately half of the furniture from your Australian home was shipped to the other country, the rest is in storage in Australia.

Most of the personal effects of yourself and your family have been shipped to the other country.

Apart from your Australian home, your assets in Australia include bank accounts and a share portfolio in your name. You also have a joint home loan and another joint account with your spouse.

You have remained on the Australian Electoral Roll as an overseas voter.

You and your family have retained your Australian private health insurance.

Since leaving Australia you have returned on several occasions for short periods of time to visit relatives.

You were not present in Australia for more that 183 days in the 2012-13 financial year.

You will not be present in Australia for more than 183 days in the 2013-14 financial year.

You will not be in Australia for periods totalling in excess of 183 days in either the 2014-15 or 2015-16 financial years.

You are not remitting any of the income you earn from your employment in the other country to Australia for any reason.

You have never been employed by the Commonwealth of Australia and have not contributed to any Commonwealth superannuation funds.

You have previously lodged income tax returns on the basis that you were a resident of Australia for taxation purposes.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 995-1(1).

Income Tax Assessment Act 1936 Section 6(1).

Reasons for decision

Residency for taxation purposes

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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. The tests are:

• the resides test,

• the domicile (and permanent place of abode) test,

• the 183 day test, and

• the superannuation 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 Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 (Miller's case) 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 (Case 5/2013 (2013) AATA 394, paragraph 49):

(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 Australia and the other country, and

(viii) maintenance of a place of abode.

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

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Physical presence in Australia

A person does not necessarily cease to be a resident of a particular place just 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 (Joachim v Federal Commissioner of Taxation 2002 ATC 2088, at 2090).

Although you have been physically absent from Australia for several years, we consider that you have maintained a level of continuity of association with Australia that is consistent with you being a resident of Australia for taxation purposes. Furthermore, although you have stated you intend to live in the other country for the foreseeable future and cannot state with any certainty when or if you will return to Australia, we consider that you have an intention to return and that you have also maintained an attitude that Australia remains your home. To support these conclusions, we note that:

• When you departed Australia your Australian home was rented out as opposed to having been sold. The fact that you have retained ownership of your Australian home supports the conclusion that you have an intention to return to Australia at some stage and that you consider Australia to be your home. Your continued ownership of your Australian home also adds weight to the conclusion that you have maintained a level of continuity of association with Australia that is consistent with you being a resident for taxation purposes.

• You have stated you cannot state with any certainty when or if you will return to Australia or stay in the other country. You have also stated that that you would like to stay in the other country for several years but that is dependent on a number of factors, including your children's schooling and the health of relatives in Australia. The statements conflict with each other and regardless of any intention you have to return to Australia or not, we consider the latter statement has more bearing on any consideration of your residency status under the resides test. At the very least the latter statement is consistent with you having an attitude that Australia remains your home, and is indicative of you having maintained a continuity of association with Australia.

• The fact that you have retained a professional association with your former Australian employer is also evidence of your continuity of association with Australia.

• Half of the furniture that was in your Australian home when you left Australia is still in storage in Australia, as opposed to having been disposed of or taken to the other country with you. We consider this to be indicative of an intention to return and an attitude that Australia remains your home.

• The fact that you have remained on the Electoral Roll, albeit as an overseas voter, indicates you wish to be able to vote in Australian elections and is supportive of the conclusions that you have retained a degree of continuity with Australia that would be consistent with you being regarded a resident for taxation purposes, as well as an intention to return, and an attitude that Australia remains your home.

• The fact that you have chosen to maintain your Australian private health insurance is also supportive of the conclusions that you have retained a degree of continuity with Australia that would be consistent with you being regarded a resident for taxation purposes, as well as an intention to return, and an attitude that Australia remains your home.

• We consider the facts that you have retained various Australian assets including bank accounts and a share portfolio, and have retained your Australian home loan are also supportive of the conclusions that you have retained a degree of continuity with Australia that is consistent with you being regarded a resident for taxation purposes, as well as an intention to return, and an attitude that Australia remains your home.

Nationality

The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is a factor that is considered along with all of the circumstances of each case.

You are an Australian citizen living and working in the other country under the terms of a visa that is valid for several years and can only be extended if you remain employed in the other country. We do not consider this situation adds any weight one way or the other to any conclusion about your residency status for taxation purposes.

History of residence and movements

In Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (Iyengar's case), the Tribunal noted that both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident (for taxation purposes) in a country in a particular income year.

When you left Australia you did so because you obtained employment in the other country and whilst that employment is full-time, you are only entitled to reside in the other country under the terms of a visa that must be renewed after three years and is only renewable if you have continued employment in the other country.

The terms of your visa and the reason for your move to the other country are both suggestive of the fact that were it not for your employment in the other country, you would ordinarily be resident in Australia. Indeed, this conclusion is supported by the fact that you have previously lodged income tax returns on the basis that you were a resident of Australia for taxation purposes.

Habits and 'mode of life'

In Iyengar's case the Tribunal noted that examining the habits of life of individuals can be useful to determine whether there has been any change or break in their mode of life which would lead to the conclusion they had ceased to reside in a particular place.

You moved to the other country with your family because you secured full-time employment in the other country. Your children are attending school in the other country and you have rented accommodation in the other country where you are residing with your family. It can be said that these facts all point to a 'mode of life' that is consistent with you having ceased to reside in Australia.

On the other hand, you have retained various Australia assets, including the family home, a share portfolio and bank accounts. You have remained on the Electoral Roll and you have retained your Australian private health insurance. All these facts suggest that your 'mode of life' has not changed to the extent that it could be said you had ceased to reside in Australia.

On balance, we do not consider this factor places any weight one way or the other on any conclusion regarding your residency status for taxation purposes.

Frequency, regularity and duration of visits to Australia

In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that the mere fact that visits to a country are of short duration does not of itself exclude residence in that country.

When considering the issue of return visits to Australia by a taxpayer who was living and working overseas, the Tribunal in Iyengar's case also noted that the brevity of a visit to a particular country compared to length of time spent abroad does not exclude an individual from being a resident in the country visited.

You left Australia because you obtained full-time employment in the other country.

Since leaving, you have returned to Australia on several occasions for short periods of time to visit relatives.

Although these trips have been brief, we do not consider the brevity of these visits excludes you from being considered a resident of Australia for taxation purposes under the resides test.

Purpose of visits to and absence from Australia

It is apparent from the information you have provided that you are not entitled to reside permanently in the other country under the terms of your visa. Rather, your ability to remain living in the other country and to have your visa extended beyond its expiry date is linked directly to you having employment in the other country. We consider this to be indicative of the fact that your absence from Australia is because of your employment, not because you have any intention of migrating permanently to the other country.

Family and business ties to Australia and to the country you are working in

This factor can be expanded to include family, social, business, employment, and professional ties to Australia and to the country you are living in.

In relation to Australia, it is clear from the facts you have provided that you have family ties in Australia. It is also clear that you have maintained some professional associations in Australia through your continued involvement with your previous Australian employer.

In relation to the other country, you are residing there with your spouse and children and those family ties can be said to be greater perhaps than any family ties you have in Australia. Your main employment is also in the other country where you have full-time employment.

On balance, we consider these factors are more suggestive of you not being a resident of Australia for taxation purposes under the resides test.

Maintenance of a place of abode

When considering this factor in Iyengar's case, the tribunal noted that:

Another important factor in determining whether or not a person has ceased to be resident in a particular country is whether the person maintains a 'place of abode' in that country, whether owned by them or not, when they are absent from that country.

When you left Australia to live in the other country with your family you rented out your Australian home, rather than choosing to dispose of it. We consider this supports a conclusion that you have maintained a place of abode in Australia since leaving.

Application of the resides test to your circumstances

As stated previously, the ordinary meaning of the word 'reside' should be attributed the widest possible meaning when considering the application of the resides test in determining a person's residency status for taxation purposes.

On balance, and considering all of the above, we consider you have remained a resident of Australia for taxation purposes under the 'resides' test from the time you left Australia and, unless there is a change in your circumstances as described in the facts of this case, you will remain a resident under the resides test until 30 June 2016.

Because we have determined you are a resident under the resides test, the remaining three tests do not need to be considered in your case.

Conclusion

Unless there is a change in your circumstances as described in the facts of this case, you will be a resident of Australia for taxation purposes until 30 June 2016 under the resides test.