Edited version of your written advice

Authorisation Number: 1013092717137

Date of advice: 16 September 2016

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 20XX

Year ending 30 June 20YY

Year ending 30 June 20ZZ

The scheme commenced on:

August 20WW

Relevant facts and circumstances

You were born in Australia and you are a citizen of Australia.

You departed Australia in the 20WW income year for work purposes.

Your work contract is for 2 years.

You will remain employed by the Australian branch of the company while in Country Y.

You do not intend on leaving Australia on a permanent basis and you will return to Australia at the end of your work contract in Country Y.

You will be paid a housing allowance by your employer to rent a fully furnished apartment in Country Y and the lease will be in your employer's name.

Your employer will pay for the setup of all utilities and will pay a percentage of the ongoing cost until the end of your contract.

You and your spouse will be given one paid trip to Australia each year paid for by your employer.

You will maintain your health insurance in Australia and you will also have overseas health insurance.

You have less than five children who will remain in Australia.

Your spouse has accompanied you to Country Y.

Your child will remain in your home in Australia and this will be available to you at all times.

You will not take any household items to Country Y as your apartment in Country Y is fully furnished.

You will return to Australia 2-4 times a year for approximately 1 month in total for work purposes and will stay in your home in Australia.

You will return to Australia for approximately 1 month a year to visit family.

Your spouse intends on returning to Australia for a total of approximately 1 month each year you are in Country Y.

Your pets will remain in Australia.

You have the following assets in Australia:

• Main residence

• Shares

• Bank accounts

• Self-managed super fund

You will remain on the electoral roll.

You will maintain your professional memberships in Australia.

You will indicate on your departure card when leaving Australia that you are departing temporarily.

You will open a bank account in Country Y.

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 and your spouse have gone to Country Y for work purposes.

You will be in Country Y for just under 2 years.

You will remain employed by the Australian branch of the company.

Your employer will provide you with fully furnished accommodation while you are in Country Y.

Your home in Australia is available to you when you return for work purposes and to visit family.

You will maintain your professional associations in Australia.

Your pets will remain in Australia.

You do not intend on leaving Australia on a permanent basis.

Based on the facts above for the period you are working in Country Y you will remain a resident of Australia for taxation purposes as you will maintain a continuity of association with Australia.

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.

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 will set up a permanent place of abode outside Australia for the following reasons:

• You live in employer provided accommodation

• You do not intend on leaving Australia on a permanent basis

• Your children and pets will remain in Australia

• Your home in Australia is available to you at all times while you are in Country Y

You are a resident under this test.

Your residency status

You are a resident of Australia for taxation purposes for the period you are in Country Y.