Edited version of your written advice

Authorisation Number: 1012823857907

Date of advice: 18 June 2015

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods

Year ending 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts and circumstances

Your country of origin is a foreign country. You are a citizen of Australia.

You departed Australia in 20XX to live and work in another foreign country.

You entered a foreign country on a visa which did not allow you to stay permanently. It allowed you and your spouse to stay in a foreign country for less than 2 years without leaving until the visa expired.

You had no fixed date to return to Australia. Your initial appointment was for a fixed period of one year. Your and your employer's intention was that you should stay in a foreign country indefinitely; if you liked the work and lifestyle there.

Your airline ticket to a foreign country was one way. You did not hold a return airline ticket.

You did not come back to Australia for any period while you were in a foreign country. However, during the income year you were in Australia for several days (up until your departure).

All your smaller household effects were shipped over to a foreign country separately (in large suitcases) or taken with you on the plane to a foreign country. Large items that were too expensive to ship (such as furniture) were left with relatives, given away or sold.

You lived in your own dwelling before your departure for a foreign country. In your absence, the property was rented through an agent. You received rental property income from Australia while in a foreign country.

You lived in rented accommodation in a foreign country.

Regarding overseas employment:

• your employer's name was X

• you were employed by them for an initial probationary period of twelve months with the intention of staying indefinitely if you liked the work and lifestyle there

• the employment could be extended indefinitely

• you no longer have a copy of your work contract this but it was a one year secondment contract that specified your income and the leave you would receive in a foreign country.

You had been in a foreign country for over X months when you and your spouse decided you did not want to stay in a foreign country indefinitely and to return to Australia. The return to Australia was booked a few weeks before your departure from a foreign country.

You had a position or job being held for you in Australia. Your Australian employer agreed that if you decided to move back to Australia within an agreed period then your job in Australia would remain available.

You have no sporting connections with Australia. Your social connections are your spouse and numerous relatives.

Your social and sporting connections in a foreign country were made through your work and by joining sports clubs.

Neither you nor or your spouse has ever been eligible to contribute to a Commonwealth Government of Australia superannuation fund.

You advised the Australian Electoral Office to have your name removed from the electoral roll.

You did not advise any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax could be deducted. You had virtually no money in a savings account with little interest earned.

You have a few shares in an Australian company but you did not advise that you were going to a foreign country.

Your private health fund membership was put on hold while you were in a foreign country. You discussed with Medicare your move to a foreign country but you do not believe they removed you name from their records.

You lodged a tax return in a foreign country. You have provided a copy.

You cannot remember what you stated as the reason for going overseas when completing the Australian Immigration Outgoing passenger card. It was either departing permanently or departing temporarily.

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.

As stated above it is important 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 had a visa while in a foreign country which did not allow you to stay there permanently

• you lived in rented accommodation in a foreign country but own a dwelling in Australia (that you rented out while you were overseas) which you had lived in prior to your departure

• you had been in a foreign country for about X months when you decided to return to Australia

• you had a position or job being held for you in Australia and your Australian employer agreed that if you decided to move back to Australia within an agreed period then your job in Australia would remain available

• your social connections with Australia are more significant than those you had with a foreign country

• you have a bank account and some shares in Australia

• your private health fund membership was put on hold while you were in a foreign country.

Based on a consideration of all of the factors outlined above, you remained 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 a foreign country and you moved to Australian and became a citizen of Australia. Therefore, your domicile of origin was a foreign country and you changed your domicile to Australia. Your domicile of choice is Australia and remained so while you were living and working in a foreign country as you did not take any legal steps to change your domicile to another 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.

You have not established a permanent place of abode in a foreign country as your presence 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.

Therefore, you remained a resident of Australia under the 'domicile and permanent place of abode' test of residency.

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 have remained an Australian resident for taxation purposes during the time you were in a foreign country.