Edited version of your written advice

Authorisation Number: 1051322956539

Date of advice: 21 December 2017

Ruling

Subject: International residency

Question 1

Are you a resident of Australia for income tax purposes from Autumn 20XX when your spouse and children move to Australia to live?

Answer

Yes

Question 2

Do days spent in Australia while on duty count towards your total number of days in Australia for the purposes of residency?

Answer

Yes

Question 3

When calculating days spent in Australia is any part of the day considered as 1 day for the purposes of residency?

Answer

Yes

Question 4

Would obtaining private health insurance in Australia as part of a family policy change your residency status?

Answer

No

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July20XX

Relevant facts and circumstances

You are an Australian citizen and work in Country A. You moved there in 2012. You moved with a work visa that initially allowed you to work there for 2 years. This visa has since been extended. You will also be eligible for permanent residency in 20XX. You currently plan to accept permanent residency at that time.

You are married and have children. You, your spouse and children are all Australian citizens.

Your spouse now intends to move permanently back to Australia so she can provide family assistance to a family member who is ill. She has bought a home in Australia and your children will attend school in Australia.

You rent an apartment and intend to continue this lease when your family move back to Australia. You will also maintain your current bank accounts, credit cards, phone and utilities contracts in Country A unchanged after your family departs.

You will continue to not own any assets in Australia. You also intend to spend between 10 and 15 days per month in Australia i.e. less than 183 days in any income year. You will visit Australia when you have time off and leave from your employment.

You will not register for Medicare or the Australian electoral roll and will not apply for an Australian private health insurance policy.

You will continue to live and work in Country A where you will pay normal taxes on your income. You will maintain your current health, life and critical illness insurances in Country A.

You intend to maintain current memberships in Country A such as the local branch of your union and a local recreational club.

When your family moves to Australia you will continue to receive your salary into your bank account in Country A. You will use this salary to pay the mortgage on the Australian house your spouse has bought. You will also provide your spouse with financial support. These financial arrangements may change should your spouse seek and obtain employment.

Neither you, nor your spouse, has ever been employees of the Commonwealth Government and hence neither are members of any government superannuation scheme.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Question 1

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) while Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17) outlines the guidelines used to determine whether the individual is a resident.

The definition provides four tests to ascertain if an individual is a resident of Australia for income tax purposes. These tests are:

1. The resides test (residence according to ordinary concepts)

2. The domicile test

3. The 183 day test

4. The superannuation test

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 the individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for income tax purposes if they meet the conditions of one of the other three tests.

1. The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

TR 98/17 discusses the factors that are taken into account in assessing whether an individual’s behaviour is consistent with residing in Australia.

Various court and Tribunal decisions have also considered the ordinary meaning of the word ‘reside’ with the recent being Pillay v. Commissioner of Taxation [2013] AATA 447; Sneddon v. Commissioner of Taxation [2012] ATC 10-264; [2012] AATA 516 (Sneddon), Iyengar v. Commissioner of Taxation [2011] ATC 10-222;[2011] AATA 856 (Iyengar).

The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year:

● Physical presence in Australia;

● Nationality;

● History of residence and movements;

● Habits and ‘mode of life’

● Frequency, regularity and duration of visits to Australia;

● Purpose of visits to or absences from Australia;

● Family and business ties with Australia compare to the foreign country concerned; and

● Maintenance of a place of abode.

The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive.

In Joachim v. Federal Commissioner of Taxation 2002 ATC 2088; AATA 610, the Tribunal stated (at 2090):

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntarily, a person does not necessarily cease to be a resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.

Physical presence in Australia

TR 98/17 considers physical presence or length of time by itself is not determinative of residency. An individual’s behaviour as reflected by a degree of continuity, routine or habit that is consistent with residing here is relevant.

Nationality

You are a citizen of Australia but also have the right to work and live in Country A where you have established a home.

Frequency, regularity and duration of visits to Australia

You intend to spend approximately 180 days visiting Australia once your spouse returned to live in Australia. Therefore you will establish a regular pattern of visiting Australia with up to 15 days per month spent in Australia. You will be spending most of your free time and time off work in Australia.

Family and business ties with Australia

Your spouse has bought a home in Australia and you will visit her and your children in that home on a regular basis. Thus you will maintain strong family ties with Australia.

Maintenance of a place of abode

You will rent an apartment and your spouse will own and maintain a home in Australia which you will visit on a regular basis.

Based on all the facts, it is considered that on balance your behaviour is consistent with residing in Australia and being considered a resident for tax purposes under the resides test.

While being deemed a resident under one test is enough to be determined to be an Australian resident for taxation purposes, we will include consideration of the other tests below.

2. The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

“Domicile” is a legal concept to be determined according to the Domicile Act 1982 and common law rules.

A person’s domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you are an Australian citizen. You have left Australia in 2012 and have chosen to live in Country A. You rent an apartment and now live and work in Country A.

You made a permanent move from Australia in 2012. You adopted Country A as your domicile of choice and only return to Australia for brief periods. You have no intention to make Australia your domicile again.

It is considered that you have abandoned your domicile in Australia and acquired a domicile of choice in Country A where you are entitled to live work.

Permanent place of abode

A person’s ‘permanent place of abode’ is a question of fact to be determined in the light of all the circumstances of each case. (Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (Applegate)).

In Applegate, the court found that ‘permanent’ does not mean everlasting or forever but it is to be contrasted with temporary or transitory.

The courts have considered ‘place of abode’ to refer to a person’s residence, where he lives with his family and sleeps at night.

In Applegate, the judge Fisher J made the following comments when analysing the expression ‘permanent place of abode’

To my mind the proper construction to place upon the phrase ‘permanent place of abode’ is that it is the taxpayer’s fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer’s presence, the duration of his presence and the durability of his association with the particular place.

Taxation Ruling IT 2650 Income Tax: Residency – Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual’s permanent place of abode. These factors include:

(a) the intended and actual length of the individual’s stay in the overseas country;

(b) any intention either to return to Australia at some definite point in time or to travel to another country;

(c) the establishment of a home outside Australia;

(d) the abandonment of any residence or place of abode the individual may have had in Australia;

(e) the duration and continuity of the individual’s presence in the overseas country; and

(f) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer’s children, family ties.

Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors.

In your case your spouse will establish a permanent place of abode in Australia and you will share this place of abode on a regular pattern of visits to your family.

You therefore have an intention to begin a series of regular visits to Australia after March 2018, a definite point in time. These visits will be for between 10 and 15 days per month. Your spouse will establish a permanent place of abode in Australia. From that time you will divide your time between an abode in Country A and an abode in Australia.

You and your family will establish a variety of durable associations with Australia by establishing an abode, as well as arranging Australian childcare and schooling for your children and arranging financial affairs to fund such arrangements.

Based on all the facts, the Commissioner is satisfied you and your spouse will establish a permanent place of abode in Australia which you will share with your family. Therefore you are considered a resident of Australia under this test.

3. The 183 days 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.

This test is applicable to new arrivals in Australia rather than those leaving Australia.

In your circumstances your travel to Australia is to visit your spouse and children on a regular basis. You anticipate that these visits may accumulate to 180 days per year. Hence you do not exceed this limit and this test does not apply in your circumstances.

4. The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You will not be treated as a resident under this test.

Residency status

As you satisfy two of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you would be considered a resident of Australia for income tax purposes from Autumn 20XX should your spouse and children return to Australian and resume residency as outlined in your application.

Question 2

The 183 day test (discussed earlier) does not make any distinction between days spent in family or other activities. Hence days in Australia spent on duty will necessarily be counted towards the total number of days spent in Australia.

Question 3

Similarly, the Australian immigration system records the presence of persons who travel to Australia regardless of part days. Hence the presence of a person for a part day will automatically be counted towards the total number of days in Australia.

Question 4

Obtaining family health insurance as part of a family package is unlikely to materially affect this ruling as the residency decision will be based on the above factors, that is, the resides test and the domicile test. The mere fact of joining or not joining a particular family health fund will have perhaps minor bearing on the outcome of this ruling however it is unlikely to be determinative in reaching a view on your situation.