Edited version of your written advice

Authorisation Number: 1051346858563

Date of advice: 7 March 2018

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country A.

You are a citizen of Country A and Country B.

You have been unemployed in Country B since Spring 20XX.

You have accepted a permanent work contract in Country C. A condition of employment is that you are permanently based in Country C.

You left Country B for Country C to start your work contract in Summer 20XX.

Over the 20XX/20XX financial year you were in Country B for 196 days.

You commenced work in Country C in the Summer 20XX.

Your work contract is an indefinite term contract.

Your first one hundred days of your employment shall be considered as a probationary period.

You are entitled to forty-two calendar day’s annual leave with full pay for each full year of service.

You received a commercial entry visa for entry to Country C, which allows you to reside permanently in Country C.

You are currently applying for a Residency Visa.

Your partner and dependants will remain in Country B during your contract in Country C. You and your partner don’t want to take your dependants out of their Country B schools, to not cause a disruption to their studies.

Your dependants attend school in Country B.

Your partner currently works in Country B.

You are currently employed.

You shall be provided with monthly housing assistance payment and a one-off furniture allowance for an unfurnished residence.

Your rental accommodation is included as part of the employment package as a monthly accommodation allowance.

Your employment contract does not include contributions to a superannuation fund.

You shall be provided with a company maintained vehicle, fuel, insurance and maintenance for the vehicle

You shall be provided with Economy class round trip airfares for yourself and eligible family members upon confirmation of permanent residency.

You were provided with an economy ticket for the purpose of travel from Country B to Country C to start your employment contract.

You will also be provided an Economy ticket to return to Country B upon final repatriation.

You plan to stay overseas working until your retirement.

You intend on returning to Country B once or twice a year to visit family and friends.

Medical treatment shall be provided to you and your dependants through your employer.

You will not be taking any furniture or household effects to Country C and will look for a fully furnished accommodation.

The accommodation provided is for your sole use only and it not shared accommodation.

You will not be taking any personal effects with you to the Country C, just communication devices, i.e. Laptop, Mobile phone etc.

Your assets are in Country B.

You jointly own a Country B property with your partner, since 20XX.

You continue to have Country B bank accounts.

You own two vehicles which remain in Country B.

You currently have shares.

You and your partner are not eligible to contribute to the relevant Commonwealth super funds.

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.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

(i) Physical presence in Australia

A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, 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 involuntary, a person does not necessarily cease to be 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.

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.

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.

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.

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 183-day test

Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that:

● their usual place of abode is outside Australia

● they have no intention to take up residence in Australia

The term ‘usual place of abode’ is not the same as ‘permanent place of abode’. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country.

ATO view documents

Taxation Ruling TR 98/17

Taxation Ruling IT 2650

Does Part IVA or any other anti-avoidance provision apply to this ruling?

The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the SBIT low risk PART IVA list as specified in ORCLA.