Edited version of private advice

Authorisation Number: 1012642305280

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 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

The scheme commenced on

1 July 2014

Relevant facts and circumstances

Your country of origin is foreign country X.

You, your spouse and children are citizens of both Australia and foreign country X.

You have been offered a job in foreign country Y.

You and your family will be residing in foreign country X for the whole duration of the assignment with no intention of coming to Australia.

During this time you will be on a rostered arrangement. During your time off you will be spending all the time with your family in foreign country X.

You will enter foreign country Y on working permit/visa which will be arranged by your employer. You think it most likely it will allow you to stay there permanently.

Your intention is to reside overseas for the duration of the work assignment. You will not move indefinitely outside of Australia. Your intention is to save money and return to Australia.

You do not hold a return airline ticket. Your employer will purchase one-way tickets to foreign country Y and after that return tickets with foreign country Y being the country of departure and origin.

You permanently reside in a dwelling you own. You will not be able to move your personal belongings out of it in order to enable renting it. Selling it is not an option because of an expected loss you would make on disposal; so too with a car which you recently purchased.

The dwelling, car and your personal belongings are the only assets which you hold in Australia. Neither you nor or any third party will use them while you are overseas.

In foreign country X, you will live with someone in their home. In foreign country Y, your employer will supply you with accommodation.

You intend buying a car and opening a bank account in foreign country X.

The only income you receive from Australia comes from your current employment.

Your overseas employer is a company. The employment is which you expect to last for some years, possibly longer, but you do not know yet. You have supplied a copy of your employment contract.

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

Your children will accompany you to foreign country X. They will attend school there.

You have no social or sporting connections with Australia.

You do not yet know what social or sporting connections you will have with foreign country X.

Neither you nor your spouse has ever 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 Medicare or your health insurance provider to have your name removed from their records.

You have no investments in Australia.

When completing the Immigration Outgoing passenger card Part E that stated you are an Australian resident departing temporarily.

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 live in Australia with your family in a dwelling you own.

You will depart Australia to tack up a work assignment in foreign country Y.

You will enter foreign country Y on working permit/visa which will be arranged by your employer. You think it most likely it will allow you to stay there permanently.

When not working, you will live with your family in foreign country X in someone's house.

Your dwelling in Australia will not be rented in your absence. You furniture and household goods will remain in the dwelling.

(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 a citizen of both Australia and foreign country X.

(iii) History of residence and movements

You will continue to live in Australia prior to moving overseas.

(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.

Until you move overseas, you will continue to live in Australia with your family. You live in a dwelling you own and which will remain unoccupied while you are overseas.

You will take up a work assignment in foreign country Y; which may be extended.

While overseas your family will live in foreign country X in someone's house; as will you on your days off work. The children will attend school there.

In foreign country Y, your employer will supply you with accommodation at the work site.

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

You have no social or sporting connections with Australia.

You do not yet know what social or sporting connections you will have with foreign country Y and foreign country X.

(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 while overseas.

(vi) Purpose of visits to or absences from Australia

You will not return to Australia while overseas.

(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

Your relative lives in foreign country X.

Your spouse and children live with you in Australia. They will live in foreign country X; as will you on your days off work.

Business or economic

You own a dwelling in Australia which will not be rented while you are overseas.

You have no investments in Australia.

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

Assets

In Australia:

• a dwelling

• furniture and household goods

• a car

Overseas:

• you intend opening a bank account in foreign country X

• you intend buying a car in foreign country X

(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.

Prior to your move overseas, you live in a dwelling you own.

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 a citizen of both Australian and foreign country X

• when working in foreign country Y you will live in accommodation supplied by your employer

• when off work you will live in someone's place in foreign country X

• your dwelling in Australia will remain unoccupied with your furniture, household goods and car

• you have not been granted permanent residency in foreign country Y.

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.

You were born in foreign country X. Therefore, your domicile of origin is foreign country X.

You now live in Australia. You have adopted Australian citizenship. Therefore, your domicile of choice is Australia.

As you:

• have no intention of making your home indefinitely overseas and

• intend to return to Australia at the end of your work assignment and

• will retain your Australian citizenship while living overseas

you will not adopt a new domicile of choice. Therefore, your domicile of choice is Australia and will remain unchanged while you are overseas.

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.

The taxpayers in Iyengar's case and Boer v. Federal Commissioner of Taxation [2012] AATA 574; 2012 ATC 10-269 (Boer's case) lived in employer provided accommodation overseas which was not indicative of them establishing or maintaining their 'own' accommodation. This aspect was a contributing factor to them being unable to establish that they had a 'permanent place of abode' overseas.

You are only going to foreign country Y for work. You cannot obtain permanent residency there. Your continuing presence foreign country Y will be dependent on your work permit/visa obtained for you by your employer. Although it is your intention to live and work in foreign country Y for at some years, the duration and continuity of your presence there is contingent on your continued renewal of visas. This makes your presence in foreign country Y temporary in nature.

Likewise, staying with someone in foreign country X is temporary. You and your family will only live with her as long as your employment in foreign country Y continues. After which you will return to Australia.

You have not established a permanent place of abode in foreign country Y or foreign country X as your presence 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 remain a resident of Australia under the 'domicile and permanent place of abode' test of residency.

Your residency status

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.