Edited version of private advice

Authorisation Number: 1012638591981

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 June 2014

Relevant facts and circumstances

You are a citizen of Australia.

Your country of origin is Australia.

You have been offered employment for a number of months in the foreign country.

You will either return to Australia at this time or, if your employment is extended, remain living and working in the foreign country.

You have a working visa,

You will be departing Australia on a date.

Your overseas employer will not provide you with accommodation. You do not have accommodation set as yet. You will be staying with someone until you can find your own accommodation.

You do not intend residing overseas permanently. After your visa expires, you will stay in the foreign country for a minimum X months; no longer than X years. You plan to return to Australia.

You do not have a return airline ticket.

You will not come back to Australia during your time in the foreign country.

You still have a job being held for you in Australia.

In Australia, you do not have your own place to live in; you live with your parents. Your household effects in Australia will be left at someone's place.

You have an online savings bank account in Australia.

You will not be receiving income from Australian sources.

You have no assets overseas apart from traveller's insurance.

You do not have a spouse.

No family accompany you overseas as it is a work appointment; you will travel alone.

Your social and sporting connection with Australia is membership of a club.

You have no social and sporting connection with the foreign country.

You have never been a Commonwealth Government of Australia employee for superannuation purposes.

You have not advised the Australian Electoral Office to have your name removed from the electoral roll.

You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted.

You are in the process of putting your health insurance on hold and taking out comprehensive traveller's insurance.

You will not lodge tax returns in any other countries

You will state as the reason for going overseas when completing the Australian Immigration Outgoing passenger card: working visa - appointment 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 will move to the foreign country to work.

You have a temporary work visa which allows you to stay for up to X years.

Your employer will be XXXX.

You will be departing Australia on a date.

Your job appointment commences in the foreign country on a date.

This initial job offer will end on a date but may be extended for up to X years.

(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

Until you move to the foreign country, you continue to live in Australia.

You will move to the foreign country to live and work.

You will stay work for a minimum of X months, but no longer than X years.

You will not return to Australia while overseas.

After completing your work placement you will return to Australia.

(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 will live and work in Australia until you move to the foreign country.

You will move the foreign country to take up an offer of employment.

The job offer is for a number of months but which may be extended.

You have a temporary working visa which will allow you to stay for up to X years but which does not permit you to stay permanently. After your visa expires you intend to return to Australia.

You still have a job being held for you in Australia. You are taking leave without pay for a minimum of X months.

You do not have your own place to live in Australia; you live with some people.

You will be staying with someone in the foreign country until you can find your own accommodation.

Your social and sporting connection with Australia is membership of a club.

You have no social and sporting connection with the foreign country.

You have no spouse and no-one will accompany you to the foreign country.

You have an online savings bank account in Australia.

You will not be receiving income from Australian sources.

You have no assets overseas.

Your household effects in Australia will be left at someone's place.

You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted.

You are in the process of putting your health insurance on hold and taking out comprehensive traveller's insurance.

You will you lodged tax returns in any other countries

(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 will not return to Australia until your employment in the foreign country ceases; after X years at most.

(vi) Purpose of visits to or absences from Australia

You will not return to Australia during your time in the foreign country.

(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 a spouse or children.

Your parents live in Australia.

Business or economic

You have a job offer with X for a minimum of X months but which may be extended.

You have a position job being held for you in Australia.

You have an online savings bank account in Australia.

You will retain your health insurance in Australia. It will be placed on hold while you are in the foreign country.

Assets

Your asset in the foreign country is:

• comprehensive traveller's insurance.

Your assets in Australia are:

• an online savings bank account

• your household effects

• private health insurance.

(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.

In Australia, you live with some people in their place; which is where your household effects will remain while you are in the foreign country.

You will be staying with a friend until you can find your own accommodation.

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 work visa is for X years and does not permit you to stay permanently

• your employment offer is for X months but may be extended

• you have a position job being held for you in Australia.

• you live with some people in Australia

• you will live with a friend in the foreign country until you find your own accommodation

• after your visa expires you will return to Australia.

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 live with some people in Australia

• you will live with someone in the foreign country until you find your own accommodation

• 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 work visa, which is limited to two years. You have not been granted permanent residency in the foreign country or any other country and your employment offer is for X months (though possibly longer). These facts mean that 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.