Edited version of your written advice

Authorisation Number: 1012872166373

Date of advice: 4 September 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 ended 30 June 2016

The scheme commenced on:

1 July 2015

Relevant facts and circumstances

You are an Australian citizen.

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

You plan to live in country A for more than 12 months.

You have an ongoing job in country A.

It is your intention to live and work in country A for more than 3 years.

Your employment contract includes an annual free return ticket to Australia.

You are living and working in country A on a work visa.

The visa does not allow you to live there permanently but is renewable when it expires.

You are sub-leasing and apartment in country A until you return to Australia temporarily.

As part of your contract with your employer in country A, you are returning to Australia after your initial six months for six months to follow up on ongoing research.

Your employer has not provided you with accommodation.

You have set up a bank account in country A.

Your assets in Australia include a house (you own %), car, bank accounts and household goods.

The person you share the house with remains living there while you are overseas.

You do not have a job being held for you in Australia but have an affiliation with an institution, but it is not a paid position.

You received your final pay from your Australian employer as you resigned.

You are not married and do not have children.

Your extended family and friends live in Australia.

You do not have any social or sporting connections in country A.

You have been a Commonwealth Government of Australia employee in the past and are a member of the PSSaP.

You remain on the Australian electoral role.

You have not advised any financial institutions or Australian companies that you are a foreign resident.

You have not had your name removed from Medicare or your private health fund.

You expect to lodge a tax return in the overseas country at the end of their financial year.

You stated the reason for going overseas as 'Business and teaching' on your outgoing passenger card.

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 went to the country A on # and will return in # to Australia to work for six months.

You will sublease your apartment in country A.

You have a home (which you own % of) to return to, car, and extended family and friends in Australia.

Your work visa does not allow you to stay permanently in country A.

Based on the facts above you are residing in Australia according to ordinary concepts for the period 1 July 20XX to 30 June 20YY as you continue an association with Australia and will reside here for at least 6 months of the year.

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' 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. You will retain your domicile of origin unless and until you acquire a domicile of choice in another country or until you acquire another domicile by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country, for example through having obtained a migration visa.

Your domicile is Australia as you do not have a permanent resident visa in an overseas country.

You have not advised any Australian financial institutions, companies, or Medicare that you are a foreign resident.

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 had a permanent place of abode outside Australia for the following reasons:

• You have a home in Australia and will sublease an apartment in country A for six months until you return to Australia for 6 months.

• Your car and household effects remain at your home in Australia.

You are a resident under this test.

Your residency status

You are a resident of Australia for taxation purposes for the period 1 July 20XX to 30 June 20YY.