Edited version of your written advice

Authorisation Number: 1012704153715

Ruling

Subject: residency

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on

1 July 2010

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 a foreign country A relative, which allowed you the right of permanent residency there.

You married a 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.

You retired from employment in foreign country A.

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 relative became ill and you travelled between foreign country A and Australia to visit them. These visits were less than 183 days in any income year. It was not until the 2012-13 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 2010-11 and 2011-12 income years were less than 183 days in any income year.

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 house next to your relative's with the intention of living there and caring for them in their later years. You currently are residing in this house for approximately six months of the year.

Since the end of XXXX 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, adult children and friends.

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

The other assets you have in Australia, apart from the dwelling you purchased, are superannuation and bank accounts.

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 into an Australian superannuation fund.

You hold about X deposits in Australian bank accounts.

You currently have money invested in managed funds in the foreign country A.

You are entitled to a pension and the government pension 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 both have led more independent personal lives since XXXX but still keep in regular contact; as well as your children.

• Neither of your adult children wish to reside in Australia. Both are adult and embarked on professional 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 as a young married mother with small children.

• you have been active in a club and other organisations

• you have done volunteer work

• you are a regular communicant at a church

Your social and sporting connections with foreign country A:

• friends from raising children and working there

• your two adult children and your spouse

• you have ties with your spouse's family

• you are a member of societies and clubs.

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:

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.

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

• you have lived mostly in Australia

• 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, which you live in

• you and your spouse lead more independent personal lives

• your adult 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 that country. 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

• 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 adult 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 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.