Edited version of your written advice

Authorisation Number: 1012983889652

Date of advice: 15 March 2016

Ruling

Subject: Residency

Question and answer

Were you a resident of Australia for taxation purposes for the period # to #?

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

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 are a citizen of Australia and Australia is your country of origin.

You are retired from work in #.

You lived in country A aboard your vessel from # onwards.

You left country A and returned to Australia on #.

You then returned to country A on # and returned to Australia from # until #.

You generally returned to Australia once or twice a year to visit family and friends.

You did not intend residing overseas permanently.

The purpose of your return to # in # was to sell your vessel.

You re-entered country A on a visa which allows you to stay for a specific number of days.

Your assets in country A included your vessel and a bank account.

Your assets in Australia included properties which are rented out via a real estate company, a motor vehicle and bank accounts.

Your household effects are kept with a storage company.

When you returned to Australia you stayed with your relatives.

You received rental income from your Australian properties.

Your children lived in Australia.

You did not have any social or sporting ties in country A.

Prior to your return to Australia you had advised Australian financial institutions and companies with whom you had investments that you were a foreign resident.

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 left country A and returned to Australia on #.

You then returned to country A on # and returned to Australia from # until #.

You re-entered country A on a visa which allows you to stay for a specific number of days.

Your assets in country A included your vessel and a bank account.

Your assets in Australia included properties which are rented out via a real estate company, a motor vehicle and bank accounts.

Your household effects are kept with a storage company.

Your children lived in Australia.

You did not intend residing overseas permanently.

You returned to Australia once or twice per year to visit family and friends while you were in country A.

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 from dd/mm/yyyy as your connection to Australia was not broken for the period dd/mm/yyyy to dd/mm/yyyy as your intention was not to remain in country A, it was to sell your vessel.

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 Australia.

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

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:

• You returned to country A to sell your vessel.

• Your visa only allowed you to stay in country A for a specific number of days.

You were a resident under this test.

Your residency status

You were a resident of Australia for taxation purposes for the period # to #.