Edited version of private advice

Authorisation Number: 1051520385030

Date of advice: 29 May 2019

Ruling

Subject: Residency of Australia - working overseas for a period of time

Question

Are you a resident of Australia for income tax purposes?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2017

Year ended 30 June 2018

Year ended 30 June 2019

The scheme commenced on:

1 July 2016

Relevant facts and circumstances

You are an Australian citizen with no other citizenships who departed Australia in early 2017 to take up an assignment with Company A, in Country A. The length of the assignment was for two years and your intention was to remain there for the entire term of the assignment.

Your family departed Australia shortly after you left to join you. You also arranged for your family pets to be sent to join your family.

Prior to departure you arranged for your family home in Australia to be occupied by family members and a formal occupancy agreement was prepared and signed. This property was subsequently leased to tenants from late 2017 onwards on normal commercial terms.

All contents of the family home were placed into long term storage once the home was leased. You also stored other non-essential items.

You sold your vehicles before departing from Australia.

You maintained an Australian bank account, a mortgage and some Australian shares and also maintained membership of Australian superannuation funds.

Once the family home was leased you redirected your mail to a family member's address so that mail could be redirected to you. You did not notify your bank or share registries of your overseas address due to the mail redirection.

You and your spouse removed yourselves from the Australian Electoral Roll and suspended your private health insurance before departure.

Neither you, nor your spouse, had any active memberships of clubs or societies in Australia before departing Australia.

On departure you both indicated that you were permanently departing Australia on Immigration departure cards.

You arranged for personal belongings to be sent to Country A.

You arranged to lease accommodation for a two year period which was suitable for you and your family. You then furnished your apartment using local suppliers.

You leased a car for your family's exclusive use while in Country A.

You opened a local bank account in and had your salary directed to this account. You also hold credit cards and have also been issued with a business credit card in that country.

You became a member of a local social club.

Your child was enrolled at a local school and participated in all activities such as social and sporting events as well as routine school attendance.

A change in your role required that you return to Australia to fill a support role in your original position. This change was announced about half way through the two year period. Nevertheless you delayed your departure to allow your child to finish the school year. This caused you to undertake several business trips to Australia until your eventual departure from Country A; arriving in Australia in early 2019.

The new role requires travel to some overseas countries that were closer to Country A.

You travelled to Australia for both business and personal reasons in the period of absence from Australia.

During your travel to Australia in this period you stayed in hotels and other temporary accommodation.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

Subsection 6(1) of the ITAA 1936 provides four tests to determine whether a person is a resident of Australia for income tax purposes. These tests are:

·  the resides test

·  the domicile and permanent place of abode test

·  the 183 day test

·  the Commonwealth superannuation fund 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 an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests.

The resides test

The Macquarie Dictionary defines reside as to dwell permanently or for a considerable time, have ones abode for a time. The Shorter Oxford English Dictionary defines reside as to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia provides guidelines. Although you are not a migrant entering Australia, the ruling outlines some relevant principles. The following factors are relevant:

·  physical presence

·  intention or purpose of presence

·  family and/or employment ties

·  maintenance and location of assets

·  social and living arrangements.

Residence was discussed in Joachim v. FCT 2002 ATC 2088. In that case it was highlighted that 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'.

You referred to the facts in Commissioner of Taxation v. Miller (1946) HCA 23, Dempsey v. Commissioner of Taxation [2014] AATA 335, and Agius v. Commissioner of Taxation [2014] AATA 854 to compare to your situation. It was stated by Logan J at paragraph 8 in Harding v. FC of T [2019] FCAFC 29 (Harding); 'it is of cardinal importance not to elevate into matters of principle in a later case the particular facts found decisive in the different circumstances of an earlier case'. The facts of your case will not be compared to the facts of the previous cases.

In your case, you were born in Australia and are a citizen of Australia. You accepted an assignment overseas for a period of two years. Your family accompanied you overseas. You have leased accommodation for you and your family for a term of two years. You became a member of a local club.

You still have ongoing ties with Australia. You have kept Australian bank accounts and have properties in Australia. Your contents were placed into long-term storage. You have rented out your home in Australia. You intend to return to Australia. You redirected your mail on a temporary basis pending your return. All of these indicate that you have not abandoned, in a permanent way, your Australian residence.

The Commissioner believes that you remain a resident of Australia for taxation purposes because you have maintained a continuity of association with Australia. You are a resident of Australia under the resides test for the financial years ended 30 June 2017 to 30 June 2019.

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' 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 a citizen of Australia. You have left Australia and have chosen to work in Country A.

You have not abandoned your domicile in Australia. You have not acquired a domicile of choice in Country A as you have not demonstrated the intention to reside permanently in that country. While you have been working there you have been staying in a rented property. You have not obtained or commenced to obtain anything other than a working visa.

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.

Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia provides a number of 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 Harding v. CoT [2019] FCAFC 29 the Full Court found that 'permanent place of abodeis outside Australia' involves two considerations:

(1)  whether the taxpayer has definitely abandoned, in a permanent way, their Australian residence, and

(2)  whether the taxpayer is living permanently in a specific country, rather than moving between foreign countries.

Based on all the facts, the Commissioner is not satisfied you have established a permanent place of abode outside Australia, in Country A.

You worked in Country A for less than two years and returned to Australia regularly for business and personal reasons. You have a place to stay overseas but you have not given up your home in Australia.

You are a resident of Australia for tax purposes under this test after departure until your return.

Residency status

As you satisfy the residency test outlined in subsection 6(1) of the ITAA 1936, you remained a resident of Australia for income tax purposes for the time you were away from Australia until you returned.