Edited version of your written advice

Authorisation Number: 1051183579012

Date of advice: 3 March 2017

Ruling

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods

Year ended 30 June 20YY

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

General

Your country of origin is Australia. You are an Australian citizen.

You are a professional in your field.

You departed Australia to live and work in a foreign country.

You have not been granted permanent residency by any country.

You have a valid working visa, which expires and which would be renewed if your employment contract is extended.

Your employment visa was supplied by your employer, the University of a foreign country.

You have a foreign country Identity Card.

At the international airport you are treated as a foreign country resident and do not queue with overseas travellers, but use the exit/queue for foreign country residents.

You have a local bank account solely in your name.

Your mobile phone is registered in a foreign country and cannot be used outside a foreign country.

You have recently been advised in writing by the Australian Electoral Commission (AEC) of your removal from the electoral roll.

During the period 1 July 20XX to 30 June 20YY you visited Australia for a total of less than 183 days several of which were for work-related purposes.

You have not cancelled or suspended your private health insurance.

As far as you can recall, when completing incoming and outgoing passenger cards you initially stated your residency status and address as being in Australia. More recently, you have stated your residency status as being in a foreign country.

You have lodged one Australian income tax return while overseas. This was for the 2014-15 income year. During that year you were employed for X months in Australia and for approximately X months in a foreign country. You stated that you were an Australian resident for tax purposes.

Accommodation

Prior to leaving Australia you lived in a house which you jointly owned with your spouse.

When you first arrived in a foreign country you could not afford to rent. Initially you stayed with your supervisor in their University-owned apartment in a foreign country and then decided it would suit your needs best to stay in a hotel.

Also, leases are typically for two years are not easily broken. You were concerned that if you took out a lease in a small apartment you would be tied to that lease and would not be able to move into a larger apartment if you decided to bring your family to a foreign country.

Assets

The assets you have in Australia are the home owned with your spouse and a bank account held jointly your spouse.

You have no investments, motor vehicle or any other property.

All your household effects are jointly owned with your spouse and they have remained in the house you own in Australia.

Your personal effects (such as books and photos) were shipped to a foreign country by your employer prior to your departure from Australia.

The last income you received from Australian sources was for a contract of employment at which ended before your departure for a foreign country.

Apart from a bank account, the only asset that you have acquired in a foreign country is a mobile phone.

You are a foreign country resident for a foreign country tax purposes. You have lodged income tax returns in a foreign country for several financial years:

Family and social connections

Your child has a medical condition that requires ongoing medical treatment by a team of health professionals. This is the main reason that your family has not yet moved to a foreign country. You have made the very difficult decision for your spouse to stay in Australia while you work in a foreign country at the moment.

You have not maintained any professional, social or sporting connections with Australia.

You do not maintain any professional or occupational memberships in Australia.

You have established professional connections in a foreign country by becoming a member of a professional society and socially you have become a member of social group.

You have not obtained any overseas qualifications. You do not require a driver's licence in a foreign country.

Employment

You are a mid-career professional. Your first preference is to live and work in Australia. However, due to the current employment climate there are very few positions in your field in Australia. After your last contract finished in Australia, you were able to obtain a X year contract (with option for renewal) at the University of a foreign country.

You have never been employed by the Commonwealth of Australia. You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990. You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976. Your spouse is a not a contributing member of the CSS or PSS.

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.

There are several factors outlined above which indicate that you have not ceased to be a resident of Australia, specifically:

● You departed Australia to live and work in a foreign country.

● You have not been granted permanent residency in a foreign country. Your employment visa was supplied by your employer, the University of a foreign country. If it expires it would be renewed if your employment contract is extended.

● Prior to moving to a foreign country you lived in a house with your spouse and child. Your spouse and child remain in Australia in the house you and your spouse jointly own. All your household effects are jointly owned with your spouse and they remained in the house.

● You took your personal effects with you to a foreign country.

● Initially you stayed with your supervisor in his University-owned apartment in a foreign country and then moved into hotel accommodation.

● You have made several short visits to Australia totalling less than 183 days to visit your spouse and child. Several days were for work-related purposes.

● You have not maintained any professional, social or sporting connections with Australia.

● You have established professional connections in a foreign country by becoming a member of a society and socially you have become a member of social group.

● You have had your name removed from the Australian electoral roll.

● You have not cancelled or suspended your private health insurance.

Based on a consideration of all of the factors outlined above, you were a resident of Australia according to ordinary concepts as you maintained a continuity of association with Australia for the year of the ruling.

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.

As you remained an Australian citizen while living in a foreign country, your domicile is Australia and remains unchanged.

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.

In your case, you:

● Retain a home in Australia where your spouse and child live.

● Live in hotel accommodation in a foreign country.

The Commissioner is not satisfied you have a permanent place of abode outside of Australia as hotel accommodation is not considered to be permanent and you have a home you can return to at any time in Australia.

Therefore, you were a resident of Australia under the 'domicile and permanent place of abode' test of residency for the year of the ruling.

Your residency status

As you were 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 were an Australian resident for taxation purposes for the year of the ruling.