Edited version of your written advice

Authorisation Number: 1012744254700

Ruling

Subject: Residency Status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

The scheme commences on:

The scheme has commenced

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were born in Australia and are a citizen of Australia.

You are a qualified professional.

You have a spouse and dependant who both resided with you in Australia.

You accepted a permanent employment position in country T and resigned from your employment position in Australia.

You had previously lived and work overseas for a number of years before returning to Australia.

You left Australia to commence your employment in country T with the intension of remaining overseas for the remainder of your working life.

You entered country T on a visa that was provided by your employer that allowed you to live and work in country T for a number of years.

It was planned that your spouse and dependant would join you in country T once your dependant's school year had concluded.

On arrival in country T you signed a lease on an apartment, bought a motor vehicle, opened bank accounts, entered into pay TV contract and bought furnishings and household goods.

You also researched, visited and elected an educational institution for your dependant to attend in country T.

From the date of your departure you returned to Australia on a number of occasions for short periods for family reasons.

Your spouse and dependant visited you in country T on a number of occasions.

Shortly after your arrival in country T, your employment was terminated by your employer in country T. Shortly afterwards you left the organisation.

Following your separation from your employer you applied for and were granted a "Personalised Employment Pass" for a number of years, with the intension on remaining in country T.

During the subsequent months you were successful in finding some employment, including a short term contract with another employer however you were not successful in finding full time employment.

As a result of the instability of your employment situation your spouse and dependant never moved to country T and remained in your family home in Australia.

You do not have any social or sporting ties in Australia.

Your country T social and sporting ties consist of sporting activities and social events.

Your assets in Australia consist of your family home, motor vehicle, share portfolio, superannuation fund and bank accounts. You disposed of some of your share portfolio, motor and closed a bank account prior to leaving Australia.

You had conversations with local real estate agents about listing your Australian family home for rent.

Your assets in country T consist of a motor vehicle, household furniture and bank accounts.

When lodging your most recent income tax return, you included the deemed disposal of your share portfolio on the day that you departed Australia. You also advised the ATO that you were a non-resident for income tax purposes.

You have lodged income tax returns to the country T authorities.

You advised the ATO that you were no longer a resident of Australia when lodging your most recent income tax return.

You did not advise Medicare or your health insurance provider to have your name removed from their records due to your spouse and dependant remaining in Australia.

You did not advise the Australian Electoral Commission to remove your name from the electoral role.

You did not advise any Australian financial institutions with which you have investments that you are a foreign resident.

You did not advise your bank with whom you have accounts with that you were no longer a resident for income tax purposes.

Neither you nor your spouse has been an employee of the Commonwealth Government of Australia.

After being unsuccessful in finding a full time employment position you returned to Australia after being absent from Australia for approximately 12 months.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Residency

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the 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 NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia.

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 satisfy the conditions of one of the other three tests.

The resides test

In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; (2002) 51 ATR 1173 at paragraph 43-44, it was determined that the word 'resides' should be given the widest meaning.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia, identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes.

According to paragraph 20 of TR 98/17 factors to be considered in determining residency in Australia are:

 •  intention or purpose of presence;

•  family and business/employment ties;

• maintenance and location of assets; and

•  social and living arrangements.

Paragraph 21 of TR 98/17 further states that:

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Recent case law decisions have expanded on the list of factors identified in TR 98/17.  Case 5/2013 and Sneddon v FC of T (Sneddons Case), for example, considered the following factors in relation to whether the taxpayer resided in Australia:

(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.^[4]  

In a recent case, Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (Iyengar's Case), the court found that despite the taxpayer being employed overseas for a substantial period of time , he was a resident of Australia for income tax purposes. In handing down its judgement, the court concluded that the taxpayer had not severed their ties to Australia, despite their absence.

The facts of this case were such that the taxpayer was employed overseas for a period of 2 years and 7 months. The taxpayer contended that it was their intension that their spouse would accompany him after a period of 6 months, once relocation arrangements had been made, however these plans never came to fruition. In fact the taxpayer's spouse remained in Australia with their dependant in the taxpayer's family home, with the exception of 3 occasions where the spouse visited the taxpayer for 2 periods of 1 month and 1 period of 2 months. While employed overseas the taxpayer had only returned to Australia on 2 occasions, for periods of 14 and 10 days.

In conclusion, the court found that on the balance the taxpayer was at all material times a "resident of Australia" for the purposes of the income tax legislation as he was an Australian "resident" according to ordinary concepts. The evidence made it clear that he not only maintained a place of residence in Australia but he also retained a continuity of association with Australia. His family ties and his maintenance of an Australian place of abode while employed overseas were all indicative that he was an Australian resident during the relevant period that he was employed overseas.

Your case is similar to that of the taxpayer in Iyengar's case. You gained employment overseas and had planned to live in country T for an indefinite period of time. It is acknowledged that you rented an apartment in country T and acquired various household goods to support your intension. However during the period that you were employed in country T you had maintained a place of abode in Australia where your spouse and dependant remained. Therefore in maintaining a place of residence in Australia where your family resided you retained a continuity of association with Australia during the period that you were employed in country T.

It is acknowledged that through circumstances that were beyond your control you and your family did not for fill your intension of living in country T for an indefinite period. However this does not alter the fact that during the period that you lived and worked in country T you retained a continuity of association with Australia.

Under the self-assessment system, it is up to the individual to provide the Commissioner with details pertaining to their income tax returns. The mere fact that you advised the ATO that you were no longer a resident of Australia for tax purposes does mean that your residency has been determined. Generally the establishment by the Commissioner of a taxpayer's details occurs when a review is undertaken.

Therefore consistent with the principles established in Iyengar's Case, for the period that you lived and worked in country T, you remained a resident of Australia for income tax purposes under 'the resides' test.

Accordingly, for the period included in this ruling you remained a resident of Australia under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.