Edited version of your written advice

Authorisation Number: 1051197100638

Date of advice: 28 February 2017

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2015

Year ended 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

Year ending 30 June 2021

The scheme commenced on:

1 July 2014

Relevant facts and circumstances

You are an Australian citizen and Australia is your country of origin.

You moved to Country A on DDMMYY.

You moved overseas to further your career.

Your spouse travelled to Country A with you to help you set up your apartment in Country A then returned to Australia to live.

From mid 201X you commenced a secondment in Country B.

You are living and working in Country A, and on secondment in Country B, on an employment pass which is valid for two years initially and can be renewed for three years thereafter.

You have also been granted a Dependant Pass for your spouse.

The employment pass does not allow you to reside in Country A or Country B permanently.

The terms of your assignment in Country B require you to return to Country A on completion of your term in Country B.

You intend to live and work in Country A for a number of years until you retire.

You rented an apartment in Country A. You ended the lease on this apartment when you took up the secondment in Country B.

You signed a lease for a furnished apartment in Country B.

You paid for your furniture in Country A to be moved to Country B.

In Australia you own 2 investment properties, have bank accounts and shares and a family home.

You have returned to Australia for short visits totalling XX days in the 12 months following your arrival in Country A.

You have removed your name form the electoral role.

You have advised the share registries that you are a non-resident.

You have advised your bank in Australia that you are a non-resident.

In Country A/Country B you have ongoing employment, long term accommodation for your exclusive use, bank accounts, and a motor vehicle.

You have lodged tax returns in Country A.

You financially support your family in Australia by sending the bulk of your income to the joint bank account held with your spouse.

Your spouse regularly travels to Country A/Country B to be with you

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 moved overseas to further your career.

● Your spouse helped you set up your apartment in Country A then returned to Australia to live.

● You intend to live and work in Country A for a number of years until you retire.

● You will return to live in Australia when you retire.

● You do not have permanent residency in Country A or Country B

● You financially support your family in Australia by sending the bulk of your income to the joint bank account held with your spouse.

● You have a family home you can return to in Australia.

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

Your application makes reference to Case 9/2014 [2014] AATA 969 and Mr M being 'found to be a non-resident as “Mr M's priority was his work, and his career. Mr M's attachment to his work in Oman is a very significant factor. He had established himself in Oman, including by renting a house which was for his exclusive use and having routines which involved partaking in social and sporting activities….Mr M's work ties outweighed his family ties, even though he financially supported his family by sending the bulk of his income to the joint bank account held with his wife in Australia. Mr M ordered his lifestyle around his work commitments.”

This decision was based on Mr M's 'far from harmonious' marital relationship being a 'very significant factor'. In case 9/2014 the decision weighed heavily on marital instability which is not an issue in your case.

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

● You live in rented accommodation in Country A and Country B

● You do not intend on leaving Australia on a permanent basis as you will return to live in Australia when you retire

● Your spouse and family remain in Australia

● You have a family home you can return to in Australia.

You are a resident under this test.

The 183-day test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not and do not intend to be in Australia for more than 183 days in any of the applicable financial years.

You are not a resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You and your spouse are not eligible to contribute to the relevant Commonwealth super fund.

You are not a resident under this test.

Your residency status

You are a resident of Australia for taxation purposes for the period you are in Country A and Country B.