Edited version of your written advice

Authorisation Number: 1051472116667

Date of advice: 24 January 2019

Ruling

Subject: Residency – departing Australia

Question

Are you an Australian Resident for taxation purposes from 20 December 20XX to 11 January 20XX?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2018

Year ended 30 June 2019

The scheme commences on:

1 July 2017

Relevant facts and circumstances

You are a citizen of Country A and your domicile of origin is Country A, however your domicile of choice is Australia.

You have a spouse and dependants.

You entered Australia on a visa and then obtained Australian permanent residency.

You and your spouse own an Australian Assets.

You and your family departed Australia.

You commenced employment in Country B, accompanied by your family.

You changed employers and relocated with your family to Country C.

You and your family departed Country C to commence a long-term international assignment with the same employer to Country D.

Your employer provides unfurnished accommodation.

You are provided a round trip flight to your base country from Country D.

You currently hold a residence card in Country D which is provided to you through your employer.

Your family returned to Australia in Summer 20XX.

You accompanied your family to Australia in Summer 20XX to assist them in relocating.

Your dependants attend school in Australia.

You returned to Country D in Summer 20XX.

You have visited Australia for an average of once a month.

Your current intention is to use annual leave to return to Australia to visit your family.

You have no current intention of returning to Australia at the end of this current assignment.

You continue to provide money to support your families living expenses.

You have Australian bank accounts which have been maintained to pay expenses relating to the Australian property.

You hold superannuation funds in Australia.

You are not enrolled on the Australian Electoral roll.

You do not hold Australian private health insurance but you hold international cover.

You recently obtained an Australian Drivers licence.

You have set up bank accounts in Country D.

You currently reside in Country D in unfurnished accommodation provided by your employer since arriving with your family in Summer 20XX. You have since furnished this accommodation and the majority of the furniture has remained in Country D. You have exclusive use of the accommodation.

In Country D you are a member of a Recreation centre, Geological Society and participate in social sporting events.

You own assets in Country D.

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

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

Summary

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.

Detailed reasoning

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; and

(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.

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 continue employment outside of Australia in the foreseeable future may mean in the meantime you are setting up a permanent place of abode elsewhere.