Edited version of your written advice

Authorisation Number: 1012762794269

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 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on:

1 July 2012

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 country B.

You are a citizen of both country B and Australia.

You went to country A to work on a project for your employer for more than 183 days.

Your employer requested that you extend your stay in country A.

You purchased a home in Australia and returned to live there shortly after.

From that time onwards onwards you regularly travelled from Australia to country A for work.

Your employer provided you with short term rental accommodation when you were in country A.

You had a permit that allowed you to work in country A.

It was always your intention to return to Australia.

Your spouse and children unexpectedly moved overseas due to a family matter.

You were constantly travelling between Australia, country A for work, and country C to visit your spouse and children.

While in country C, your spouse and children lived in a rented house that was close to family.

Your assets in Australia included investment properties, bank accounts, a family home, trust distributions, and you continued to use an Australian credit card while living in country A.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 subsection 6(1)

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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

• resides test

• domicile and permanent place of abode test

• 183 day test and

• Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

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.

You were born in country B.

You are a citizen of both country B and Australia.

You went to country A for work purposes.

You purchased a family home in Australia.

Your spouse and children remained in Australia, then moved overseas unexpectedly for more than 183 days, then returned permanently.

Based on the facts above you were residing in Australia according to ordinary concepts for the period you were in country A.

In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.

In your case you went to country A for work purposes. Your spouse and children remained in Australia for the majority of the time (their temporary absence was due to an unexpected family matter).

In your case you chose to accept a job outside Australia in country A which was your reason for being in country A and you therefore remain a resident of Australia for taxation purposes.

You maintained your family home in Australia while you were overseas.

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 test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is country B and your domicile of choice is Australia.

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 a person intends to live for the rest of his or her life.  An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

The Commissioner is not satisfied that you set up a permanent place of abode outside Australia for the following reasons:

• You are a citizen of Australia.

• Your spouse and children did not accompany you to country A.

• You had a home in Australia to return to.

• Your employer provided you with short term rental accommodation when you were in Country A

You are a resident under this test.

Your residency status

You were a resident of Australia for taxation purposes for the period you were outside Australia for work and recreation.