Edited version of your written advice

Authorisation Number: 1012685620000

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 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on

1 July 2012

Relevant facts and circumstances

Your country of origin is Australia. You are a citizen of Australia.

You also became a citizen of foreign country A.

You left Australia to live and work in foreign country A. You have the right of permanent residency there.

You married foreign country A citizen and had children who have dual citizenship, Australian and foreign country A.

While living in foreign country A, you maintained close links with your family and your friends in Australia, returning regularly and staying with your relatives.

You have been in Australia for part of most years since your departure.

You retired from employment.

You do not have a position or job being held for you in foreign country A.

You do not currently have an employer in Australia.

You travelled between foreign country A and Australia to visit a relative who was ill. These visits were less than 183 days in any income year. It was not until the relevant income year that you were in Australia for more than 183 days in an income year.

Your visits to and from Australia and the duration of each visit for the relevant and subsequent income years exceeded 183 days.

Your intention was always to return to live in Australia. Only in the last few years have you been able to do this as your children no longer need your financial support and you are able to afford to return to Australia and support yourself here.

You purchased a property next to your sick relative, with the intention of living there and caring for your relative. You currently are residing in this house for part of the year.

You cared for your relative until their death.

You have made Australia home again but intend to visit foreign country A regularly to see your spouse, children and friends.

You became a foreign country A citizen to insure could visit foreign country A regularly to see your children while residing in Australia.

You are in foreign country A to attend family gatherings. You hold a return ticket to Australia.

The other assets you have in Australia, apart from the dwelling you purchased, superannuation and bank accounts, consists of what you inherited from your deceased relative: their house, personal effects, car and cash.

In foreign country A you own a dwelling as a joint tenant in common with your spouse. This was your family home. Your spouse continues to live in the family home. You are able to stay there on your visits to foreign country A, if you wish.

You have contributed to an Australian superannuation fund.

You hold about $X in Australian bank accounts.

You currently have investments in managed fund in foreign country A.

You are entitled to pension in foreign country A, both of which you are presently deferring.

Your family have not accompanied you to Australia:

• your spouse wants to remain a foreign country A resident but would like to continue to visit Australia regularly. You and your spouse have led more independent personal lives for more than X years but still keep in regular contact as well as with your children.

• None of your children wish to reside in Australia. They have embarked on careers based in foreign country A.

Your social and sporting connections Australia:

• you are close to your extended family

• your own friends from school and college

• friends made during the regular trips you made home.

• you have been active in several social organisations: clubs, societies, etc.

Your social and sporting connections with foreign country A:

• friends from raising children and working there

• your adult children and your spouse

• you have ties with your spouse's family

• you are a member of in several social organisations: clubs, societies, etc.

You are currently on the electoral role.

You do not have a Medicare card.

Neither you nor your spouse has ever been a Commonwealth of Australia Government employee for superannuation purposes.

You are over 16 years of age.

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:

(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 left Australia to live and work in foreign country A.

You married a foreign country A citizen and had children.

You purchased a dwelling with your spouse which was your home. Your spouse still lives there.

Your intention was always to return to live in Australia. Only in the last few years have you been able to do this as your children no longer need your financial support and you are able to afford to return to Australia and support yourself here.

For more than five years you have lived mostly in Australia caring for a relative until their death.

You have made Australia home again but intend to visit foreign country A regularly to see your spouse, children and friends.

(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 were born in Australia. You are a citizen of Australia and of foreign country A.

(iii) History of residence and movements

You left Australia to live and work in foreign country A.

You have been in Australia for part of most years.

In X income year your relative became ill and you travelled between foreign country A and Australia to visit. You purchased a house next to your relative, with the intention of living there and providing care in their later years. You have lived mostly in Australia caring for your relative until their death.

You have made Australia home again but intend to visit foreign country A regularly to see your spouse, children and friends.

(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 left Australia to live and work in foreign country A.

You married a foreign country A citizen and had children, who are now independent.

In foreign country A own a dwelling your spouse. Your spouse continues to live in this dwelling. You are able to stay there on your visits to foreign country A, if you wish.

You retired from your job in foreign country A.

In X income year your relative became ill and you travelled between foreign country A and Australia to visit. You purchased a house next to your relative, with the intention of living there and providing care in their later years. You have lived mostly in Australia caring for your relative until their death.

You do not have a position or job being held for you in foreign country A.

You do not currently have an employer in Australia.

Your intention was always to return to live in Australia; which you now consider to be your home. Only in the last few years have you been able to do this as your children no longer need your financial support and you are able to afford to return to Australia and support yourself here.

You support yourself economically.

Your family have not accompanied you to Australia. Your spouse wants to remain a foreign country A resident but would like to continue to visit Australia regularly. Neither your children wish to reside in Australia. Your children are adults and have embarked on professional careers based in foreign country A.

(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.

For the two of the income years of this ruling you were in Australia for more than 183 days.

(vi) Purpose of visits to or absences from Australia

You left Australia to live and work in foreign country A.

You returned to Australia in 20XX, initially, to care for your relative.

For the two of the income years of this ruling you were in Australia for more than 183 days.

Your intention was always to return to live in Australia; which you now consider to be your home.

(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

In foreign country A:

• your spouse and children.

In Australia:

• your extended family.

Business or economic

In Australia:

• about $X in a superannuation fund

• about $X in Australian bank accounts

In foreign country A:

• managed funds in foreign country A

• your entitlement to pensions.

Assets

In Australia:

• about $X in a superannuation fund

• about $X

• a dwelling.

In foreign country A:

• investments in managed funds

• your entitlement to two pension

• a half share ownership in a dwelling

(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 own a dwelling in foreign country A with your spouse which you can return to on your visits to foreign country A

You own a dwelling in Australia in your name in which you currently live.

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 foreign country A and have taken up residency of Australia. Specifically:

• You have lived mostly in Australia, initially, caring for a sick relative until their death.

• You were in Australia for more than 183 days in two of the income years covers by this ruling.

• Your intention was always to return to live in Australia; which you now consider to be your home.

• You have purchased a dwelling in Australia, in which you live.

• You and your spouse led more independent personal lives.

• Your children live independently in foreign country A.

• You have extended family in Australia, with whom you keep in touch.

• You have made Australia home again but intend to visit foreign country A regularly to see your spouse, children and friends.

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.

In your case, you were born in and are a citizen of Australia.

You became a citizen of foreign country A to make it easier for you to enter foreign country A. By this time you had returned to Australia to live permanently so foreign country A did not become you domicile of choice.

Therefore, as you were still an Australian citizen while living in foreign country A, 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.

• You have lived mostly in Australia caring for your sick relative until their death.

• You were in Australia for more than 183 days in two of the income years covers by this ruling.

• Your intention was always to return to live in Australia; which you now consider to be your home.

• You have purchased a dwelling in Australia, in which you live.

• You and your spouse lead more independent personal lives.

• Your children live independently in foreign country A.

• You have made Australia home again but intend to visit foreign country A regularly to see your spouse, children and friends.

The Commissioner is satisfied you have a permanent place of abode in Australia.

Therefore, you are a resident of Australia under the 'domicile and permanent place of abode' test of residency.

As you have passed the resides and domicile and permanent place of abode tests, it is not necessary to consider the 183 day and superannuation texts.

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 for the relevant period.

There is an international agreement between Australia and foreign country A in relation to taxation which you may need to consider.