Edited version of your written advice

Authorisation Number: 1051464537252

Date of advice: 11 December 2018

Ruling

Subject: Residency for tax purposes

Question

Am I a resident of Australia for tax purposes for the period ending 30 June 2019?

Answer

Yes

This ruling applies for the following period:

Period ending 30 June 2019

The scheme commences on:

1 December 2018

Relevant facts and circumstances

You were born in the country X.

You are a citizen of Australia and country X.

You were raised in country Y and granted permanent residency in country Y.

You moved to Australia with your spouse.

You are now a permanent resident of Australia.

You travel on a passport from country X.

This allows you to enter EU countries without a visa.

You intend to reside in country Y for employment.

You intend to stay only for your work contract time.

You intend to return to Australia once the contract has finished.

You have not informed the Electoral Commission or Medicare that you are leaving.

You have not notified your private health insurance that you are leaving.

While in country Y your accommodation will be a room that is rented.

You will maintain your rental residence in Australia.

You will have bank interest as income in Australia while you are working in country Y.

Your family will remain in Australia.

You are not and have never been a member of the PSS or CSS.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Subsection 770-10(1) of the ITAA 1997

Reasons for decision

Question 1

Summary

You are a resident of Australia for tax purposes for the period ending 30 June 2019.

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms ‘resident’ and ‘resident of Australia’, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

● the ‘resides’ test,

● the ‘domicile’ test,

● the 183 day test, and

● the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word ‘reside’. As the word ‘reside’ is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

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'.

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 with Australia compared to the foreign country concerned;

(viii) Maintenance of a place of abode.

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.

Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62):

Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1.

In your case, you have been living in Australia since you moved there in 2000 with your wife accompanying you. You have established a living residence and connections and intend to return after your employment contract is completed.

Therefore, you are a resident of Australia for taxation purposes under this test and will continue to be a resident for tax purposes.

Domicile Test

You are an Australian resident if your domicile is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

You do not meet the domicile test as you were born overseas, however Australia is your domicile of choice as you have had citizenship and are now considered a permanent resident of Australia.

183 Day test

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

● your usual place of abode is outside Australia

● you have no intention to take up residence here.

You will not return to Australia during your period of absence in country Y , and your usual place of abode is in Australia.

The Superannuation Test

The superannuation test is the third statutory test. This test covers certain Australian government employees. Under the test, you are an Australian resident if you are a contributing member of:

● the Public Sector Superannuation Scheme (PSS), or

● the Commonwealth Superannuation Scheme (CSS).

Neither you nor your spouse is a contributing member of the PSS or the CSS.

As you meet the principal test for establishing residency you do not have to meet any of the additional tests and are therefore a resident of Australia for taxation purposes while you are working in country Y.