Edited version of your written advice

Authorisation Number: 1012929149922

Date of advice: 16 December 2015

Ruling

Subject: Residency

Question and answer

Were you a resident of Australia for taxation purposes for the period you were overseas working?

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20YY

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 in Country Y.

You are a citizen of Australia.

You are not a permanent resident of any other country.

You went to Country Z for work purposes.

You had a temporary visa to work in Country Z until your permanent work visa could be arranged.

The permanent work visa takes up to 12 months to obtain and you never obtained a work visa before your left Country Z.

You were required to return to Australia every three months to renew your temporary visa and you were in Australia for a week each time this occurred.

Your spouse was not able to join you in Country Z until you obtained a permanent work visa.

Your employment in Country Z was terminated after a number of months.

You stayed in the region hoping to find further employment.

You decided to return to Australia after a few months of looking for further work proved unsuccessful.

Your spouse remained in Australia for the period you were in Country Z.

Your employer provided you with an unfurnished apartment in Country Z for the duration of your employment.

You furnished the property in Country Z at your own expense.

Your child lived in your property in Australia and paid for the expenses associated with this property.

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 went to Country Z for work purposes in the relevant income year.

Your employment was terminated after a number of months and you returned to Australia when you could not secure further employment.

Your spouse did not go to Country Z with you as they were not able to do so until you obtained a permanent work visa which you did not do before your employment was terminated. Your spouse remained in Australia.

You returned to Australia each three months to renew your temporary visa and stayed for a week each time.

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.

Based on the facts you were residing in Australia according to ordinary concepts as your connection to Australia was not broken for the period you were overseas as your spouse remained in Australia and you returned on a regular basis to renew your temporary visa.

You are a resident under this test.

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 Y and your domicile of choice is Australia.

You did not change your domicile of choice to Country Z as you were not a permanent resident or citizen of Country Z.

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 did not accompany you to Country Z

• You were required to return to Australia every three months to renew your temporary work visa

• Your employer provided you with an apartment to live for the duration of your employment

You were a resident under this test.

Your residency status

You were a resident of Australia for taxation purposes for the period you were working overseas.