Edited version of private advice

Authorisation Number: 1012633239195

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on

1 July 2013

Relevant facts and circumstances

You are a citizen of Australia.

Your country of origin is Australia.

You have moved to the foreign country to work for a year. Your spouse has accompanied you.

You have an employment contract with an employer in the foreign country.

You and your spouse departed Australia on a date and arrived in the foreign country on a date.

You have a visa permitting you to work the foreign country. It does not permit you to stay permanently. You are required to leave by a date. Your intention is to return to Australia by a date after the contract expires. At this time, you and your spouse may opt to travel a little, but you anticipate being back home in Australia no later than a date.

You have never lived anywhere other than Australia, except for the period in the foreign country.

You do not have a return airline ticket.

You have not returned to Australia since first leaving.

Your employer has not provided you with accommodation. You have obtained one year lease on an apartment in the foreign country.

Your assets overseas are:

• some second hand furniture

• a bank account

• you will probably buy a second hand car.

Your assets in Australia are:

• a house owned with your spouse

• household furniture

• a car.

Most of your household effects have remained in your house in Australia. You have lent a couple of things to friends to mind for you while you are overseas, such as the television.

Some people are housesitting for you while you are away.

You are employed by a facility in the foreign country. You have an employment contract for one year. The contract cannot be extended. You have provided a copy of your contract.

You do not have a position or job being held for you in Australia.

You do not have any children.

You have a sporting connection in Australia with a club. You are also a member of a league.

You have established a sporting connection in the foreign country with a club.

Neither you nor your spouse is a Commonwealth Government of Australia for super purposes.

You have not advised Australian Electoral Commission to have your name removed from their records

The bank, with whom your mortgage is with, is aware you are overseas. You have no other investments.

You have no investments with companies.

You have advised your private health insurance, and they have suspended our membership while you are overseas.

When completing the Australian Immigration Outgoing passenger card you stated business/work as you reason for going overseas.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(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 test

• the 183 day test

• the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

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 meet the conditions of one of the other three tests.

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

You have provided a copy of the new contract.

(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.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

(i) Physical presence in Australia

A person does not necessarily cease to be a resident because he or she is physically absent from Australia.

In relation to this the AAT has stated that:

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.

You have moved to the foreign country, to work for a year.

You departed Australia on a date.

You have never lived anywhere other than Australia, except for the period in the foreign country.

You only have an employment contract and intend to return to Australia on a date.

You have a work permit for XX months which does not permit you to stay permanently.

(ii) 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 one factor that is considered along with all of the circumstances of each case.

You are an Australian citizen.

(iii) History of residence and movements

You have never lived anywhere other than Australia, until you moved to the foreign country.

You have moved to the foreign country, to work for a year.

You have not returned to Australia since leaving.

(iv) Habits and "mode of life"

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.

You lived and worked in Australia until you moved to the foreign country.

You have moved to the foreign country, to work for a year. Your spouse has accompanied you.

You only have an employment contract and intend to return to Australia on a date.

You have a visa which does not permit you to stay permanently.

You live in rented accommodation in the foreign country.

You have established a sporting connection in the foreign country with a club.

You have a sporting connection in Australia with a club. You are also a member of a league. Both of these groups have a sporting and a significant social element.

You and your spouse own a house in Australia where most of your household effects will remain while you are in the foreign country.

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

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during period of two years and seven months to be residing in Australia.

You have not returned to Australia since leaving.

(vi) Purpose of visits to or absences from Australia

You have not returned to Australia since leaving.

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

Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident.

Family

You do not have any children.

Business or economic

You have a contract with an employer.

You do not have a position or job being held for you in Australia.

You have a mortgage with a bank.

Assets

Your assets in the foreign country are:

• some second hand furniture

• a bank account

• you will buy a second hand car.

Your assets in Australia are:

• a house

• household furniture and most of your household effects

• a car.

(viii) Maintenance of Place of abode

The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer.

You and your spouse own a house in Australia where your furniture and most of your household effects will remain while you are in the foreign country.

You have obtained one year lease on an apartment in the foreign country:

Summary

As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically;

• you are an Australian citizen

• your visa is for XX months and does not permit you to stay permanently

• your employment contract is for a period and cannot be extended

• you maintain a place of abode in Australia in a house you and your spouse own and to which you will return when you return to Australia

• you will live in an apartment in the foreign country which has been leased.

Based on a consideration of all of the factors outlined above, you are a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period.

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 and permanent place of abode test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is 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 acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

As you are still an Australian citizen while living in the foreign country, your domicile is Australia and remains unchanged.

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 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.

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

In your case:

• you own a house in Australia with your spouse to which you will return after your time in the foreign country

• you live in an apartment in the foreign country that has been leased

• you have not been granted permanent residency in the foreign country or any other country.

Your duration and presence in the foreign country is limited by your visa, which is limited to XX months, and your non-renewable employment contact and apartment lease, both limited to XX months, makes your presence in the foreign country temporary in nature.

You have not established a permanent place of abode in the foreign country as your presence in there is temporary in nature. You cannot establish a permanent place of abode when your presence in a place is temporary.

The Commissioner is not satisfied you have a permanent place of abode outside of Australia.

Therefore, you will be a resident of Australia under the 'domicile and permanent place of abode' test of residency for the relevant period.

Conclusion

As you are a resident of Australia under two of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are considered to be an Australian resident for taxation purposes during the relevant period.