Edited version of your written advice

Authorisation Number: 1012772878932

Ruling

Subject: Residency

Question and answer

Were you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods

Year ending 30 June 20YY

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

You are a citizen of Australia and of foreign country A.

You have not been granted permanent residency by any other country.

Your country of origin is foreign country A, where you were born.

You lived and worked in Australia for several years.

While in Australia, your family remained in foreign country B. They are citizens of foreign country B.

You have a spouse and children.

While in Australia, you were living on a permanent basis in rented properties and then in a property you purchased.

During the year of the ruling, you made several visits to foreign country B for work and to visit your family.

You were in Australia for fewer than 183 days of the income year. You entered foreign country B on a visa which did not grant you permanent residency status. You did not intend to reside there permanently.

While living in foreign country B, you were not receiving income from Australian sources.

You resigned your Australian job before departing for foreign country B.

You had a place to live in foreign country B.

The only assets you had in Australia are house hold goods. You put these in storage before you left Australia for foreign country B. From foreign country B you called someone in Australia to dispose of them.

You own no assets in foreign country B.

Your social and sporting connections with Australia are friends, family and work colleagues.

Your social and sporting connections with foreign country B are friends, family and work colleagues.

You and your spouse have never been Commonwealth Government of Australia employees for superannuation (super) purposes.

You may have advised the Australian Electoral Office that you will be overseas.

You have not advised Medicare or health insurance provider to have your name removed from their records.

You have lodged tax returns in foreign country B.

You stated visiting family as the reason for going overseas when completing the Australian Immigration outgoing passenger card.

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. In your case, you:

• lived and worked in Australia for several years

• departed Australia for foreign country B for employment and to visit your spouse and children

• entered foreign country B on a visa which did not grant you permanent residency status

• returned to Australia several time during the income year

• owned a place to live in in Australia but not in foreign country B

• did not intend to reside in foreign country B permanently.

Based on a consideration of all of the factors outlined above, you were a resident of Australia according to ordinary concepts as you maintained a continuity of association with Australia for the income year of the ruling.

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 foreign country A and moved to Australia and became a citizen of Australia.

Therefore, your domicile of origin was foreign country A and you changed your domicile to Australia. Your domicile will still be Australia while you are working in foreign country B as you did not take any legal steps to change your domicile to that country.

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.

During the income year of the ruling, you went to foreign country B for work and to visit your family. You entered foreign country B on a visa which did not grant you permanent residency status. You did not intend to reside there permanently. During this time you returned to Australia several time to a residence you own here. At the end of your employment in foreign country B you returned to Australia to live and work.

You did not establish a permanent place of abode in foreign country B as your presence there was 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 had a permanent place of abode outside of Australia for the income year of the ruling.

Therefore, you were a resident of Australia under the 'domicile and permanent place of abode' test of residency for the income year of the ruling.

Your residency status

As you were 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 have been Australian resident for taxation purposes for the income year of the ruling.