Edited version of private advice

Authorisation Number: 1051579505560

Date of advice: 29 October 2019

Ruling

Subject: Residency status

Question

Are you an Australian resident for tax purposes?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 2019

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You worked for some charities in the XYZ in early 2018.

Then you travelled to ABC as a tourist from mid 2018.

You travelled back to Australia from about a month after that.

You then returned to the XYZ to start work for your employer.

You do 95% of your work in the area you stay at.

Youstay in employer provided accommodation.

You used an Australian address as your permanent residential address on a Foreign Tax Compliance form.

You own a motor vehicle in Australia, which is garaged with a relative.

You have an Australian bank account.

You have an Australian superannuation account which received contributions in the 2017-18 year.

Your immediate family reside in Australia.

You are still on the electoral role.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for Decision

These reasons for decision accompany the Notice of private ruling.

Summary

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; and

·        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.

As a general concept, residence includes two elements: physical presence and the intention to treat the place as home. The period of physical presence in Australia is not by itself decisive when determining whether an individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant in determining the residency status. No single factor is necessarily decisive.

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.

As highlighted in TR 98/17 the quality and character of an individual's behaviour while in Australia assist in determining whether a person resides in Australia. The following factors are relevant:

·        intention or purpose of presence,

·        family and/or employment ties,

·        maintenance and location of assets, and

·        social and living arrangements.

Since the Commissioner published TR 98/17, there have been many more cases that have discussed residency status of Australians leaving Australia.

The resides test was considered in Iyengar v FCT 2011 ATC 10-222. In that case, the taxpayer was considered to be residing in Australia even though he had a two year work contract to work overseas and only returned to Australia twice in that time. He was in Australia for a period of 14 days and then later for a period of 10 days during that time. It was highlighted that the term 'reside' should be given a wide meaning and that a person does not necessarily cease to be a resident because they are physically absent. The test is whether the person has retained a continuity of association with that place. Iyengar had the required continuity of association with Australia and was considered a resident under the resides test. It was also considered that he did not establish a permanent place of abode outside Australia.

Residence was also discussed in Joachim v FCT 2002 ATC 2088 (Joachim's case). 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.

In Pillay v FC of T 2013 ATC 10-324 (Pillay's case), the taxpayer had purchased and renovated a place in Bali, Indonesia, however he was still found to be an Australian resident. He had been working overseas since 2006. He was in Australia for between six to eight weeks each year. During his visits to Australia, he would spend time at his property in Australia and visiting his children and grandchild. The taxpayer had Australian bank accounts. The taxpayer maintained a continuity of association with Australia in the relevant years despite being physically absent for significant periods.

Recent case law considers the following factors relevant in determining the residency status of an individual:

·        physical presence,

·        nationality,

·        history of residence and movements,

·        habits and mode of life,

·        social and living arrangements,

·        frequency, regularity and duration of visits to Australia,

·        family and business ties and

·        maintenance of place of abode.

The period of physical presence or length of time in Australia is not by itself decisive when determining whether an individual resides here. Equally important is the quality and character of an individual's behaviour while in Australia.

Family or business ties with a country are an important factor to be taken into account in determining whether or not a person has ceased to be resident in a particular country. The location of an individual's immediate family can be decisive (Joachim's case). In Australia, family ties outweigh business ties where the two are in conflict (Shand v FC of T 2003 ATC 2080).

In your case, you were born in Australia and are a citizen of Australia. You are working overseas for a registered charity. Your contract is for 1 calendar year. You have been living in employer provided accommodation for this time.

Although you weren't physically present in Australia for much of the time, this does not mean that you are no longer a resident of Australia. You still have ongoing ties with Australia.

You have kept an Australian bank account, a motor vehicle and a superannuation fund that has received contributions in the previous year from your work with another charity. While working overseas in the 2017-18 year you self-assessed as a resident. Your name is still on the electoral role and you have stated on your departure card that you were leaving for work purposes.

In view of the decisions arising from recent case law, the Commissioner believes that you remain a resident of Australia for taxation purposes because you have maintained a continuity of association with Australia. Therefore, you are a resident of Australia under the resides test for the 2018-19 income year.

As you are an Australian resident for taxation purposes, your Australian and overseas income is included in your assessable income in the year of receipt under subsection 6-5(2) of the ITAA 1997.