Edited version of your written advice

Authorisation Number: 1012786249716

Ruling

Subject: Residency

Questions and answers

1. Are you a resident of Australia for taxation purposes?

Yes.

2. Is your foreign source income assessable in Australia?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on:

1 July 20XX

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 overseas.

You are a citizen of both the overseas country and Australia.

You work in Country Y for your company.

This company is based in Country Y.

You are the general manager and a director of the company.

Your spouse became seriously ill and you were required to spend more time in Australia.

You returned to Australia to care for your spouse and children.

You were able to do the majority of your work from Australia and made limited trips to Country Y.

You spent 80 days overseas during the period your spouse was sick.

Your spouse and children have never lived with you in Country Y and have always remained in Australia.

Your children are enrolled in school in Australia.

Neither you nor your spouse are currently or have ever been Commonwealth government employees.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Assessment Act 1936 Subsection 6(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 overseas.

You are a citizen of both the overseas country and Australia.

You are in country Y for work purposes.

Your spouse and children remain in Australia while you are working in Country Y.

Your spouse and children have never lived with you overseas.

For the XXX income years you returned to Australia because your spouse was seriously ill.

You spent 80 days outside Australia working.

Based on the facts above you were residing in Australia according to ordinary concepts for the relevant financial years.

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 Y for work purposes. Your spouse and children remained in Australia. Your spouse and children have never lived with you overseas.

Your connection with Australia has not been broken because you are working overseas and have made trips back to Australia for family matters.

Your connection with Australia remains strong due to the fact that your family have never gone with you overseas at any point since you left Australia to work.

In your case you choose to work outside Australia which is your reason for being overseas and you therefore remain a resident of Australia for taxation purposes.

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 an overseas country 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:

• Your spouse and children have not accompanied you to Country Y

• You returned to Australia to care for your spouse and children in the relevant financial years

• Your children are enrolled in school in Australia

You are a resident under this test.

Your residency status

You were a resident of Australia for the relevant financial years.

As a resident of Australia for taxation purposes you are required to declare all your income both in Australia and outside Australia.

Your foreign sourced income is assessable in Australia and is required to be declared in your Australian tax returns.