Edited version of private advice

Authorisation Number: 1051594284073

Date of advice: 14 November 2019

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation 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 commences on:

1 July 2016

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You are not a permanent resident of any other country.

You commenced work with an overseas employer in XX 201X.

The contract was for X years and can be extended.

You intend on extending the contract in XXX2020 for a further X years.

You shared an apartment with another employee from XXX 20XX to XXXX 20XY.

You have now entered into a lease agreement for an apartment on your own in the same complex and the lease is for X years.

You have a X day shore pass to enter Country Y which is applied for by your employer and is renewed at the end of the X day limit.

You cannot stay in Country Y permanently on the shore pass.

You are a professional and you have XX days off a month with X commuting days along with XX days' vacation which you can choose to use at any time anywhere.

Since XX 201X you have spent from XXX to XXX in Country A and XXX to XXX in Australia on your days off.

You spent XX days in Australia in 2017, XX in 2018 and XX in 2019.

You stay with your family in Australia or in hotels or caravan parks.

You took all your personal belongings to Country Y with you.

You have a car in Australia and a XXXXX which is registered in your parent's name; you have no other assets in Australia.

You have no dependants.

Your family live in Australia.

You are not a resident of Country Y for taxation purposes.

You do not pay tax in Country Y.

You are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 6-5(3)

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, if you are a foreign resident, your assessable income includes only income derived from an Australian source (subsection 6-5(3) 0f the ITAA 1997).

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 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia. These tests are:

1. the resides test
2. the domicile test
3. the 183 day test
4. the superannuation 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 meet the conditions of one of the other three tests.

1. The resides test

The ordinary meaning of the word reside, according to the dictionary definition, is to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place.

In your case you have been working in Country Y since XX 201X. You have a X year contract which can be extended in XXX 2020. You intend on extending the contract for a further X years.

Therefore, you are not an Australian resident under the resides test.

2. 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 of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

The concept of Domicile was discussed in the Marriage of Emson (1980) 5 Fam LR 662:

A person may abandon his domicile of origin and acquire a domicile of choice but in order to establish a change of domicile there must be clear evidence of an intention to abandon the domicile of origin and to make a new permanent home in the country to which the person has removed. In my view a person cannot be said to acquire a new domicile until there has been a firm intention of establishing a permanent residence in another country and also the confirmation of that intention by actual residence in that country.

Declarations as to intention are rightly regarded in determining the question of a change of domicile, but they must be examined by considering the person to whom, the purposes for which, and the circumstances in which they are made and they must further be fortified and carried into effect by conduct and action consistent with the declared expression:

Ross v Ross [1930] AC 1 at 6-7 per Lord Buckmaster... Where the court finds that at a relevant point of time there is a conflict between the actual conduct of the party concerned and the verbal expression of his intention doubtless the court will in most cases prefer the act to the word - as an ancient proverb puts it: "what you do speaks so loudly that I cannot hear what you say

Further, in Fremlin v Fremlin (1913) 16 CLR 212; [1913] HCA 25 (Fremlin v Fremlin) Per Barton J:

In Winans v. Attorney-General, Lord Halsbury L.C. said:-"Now the law is plain, that where a domicile of origin is proved it lies upon the person who asserts a change of domicile to establish it, and it is necessary to prove that the person who is alleged to have changed his domicile had a fixed and determined purpose to make the place of his new domicile his permanent home." In the much older case of Udny v. Udny Lord Westbury said:-"Domicile of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. This is a description of the circumstances which create or constitute a domicile, and not a definition of the term. There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation. It is true that residence originally temporary, or intended for a limited period, may afterwards become general and unlimited, and in such a case so soon as the change of purpose, or animus manendi, can be inferred the fact of domicile is established." Lord Curriehill in the case of Donaldson v. M'Clure says:-"To abandon one domicile for another means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges and immunities which the law and constitution of the domicile confer on the denizens of the country in their domestic relations, in their business transactions, in their political and municipal status, and in the daily affairs of common life, but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence." Lord Halsbury, in Marchioness of Huntly v. Gaskell, expressed strong approval of Lord Curriehill's judgment, quoting this passage.

Your domicile of origin is Australia as you were born in Australia and you have not taken any steps to change your domicile.

Permanent place of abode

A permanent place of abode does not have to be everlasting or forever. It does not mean an abode in which the person intends to live for the rest of his or her life. It should be contrasted with a temporary or transitory place of abode outside of Australia.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) outlines some of the factors considered relevant in determining a person's place of abode. These are summarised at paragraph 23 in the ruling as:

·        the intended and actual length of the individuals stay in the overseas country (a period of two years or more in a country would generally be regarded as a substantial period)

·        any intention either to return to Australia at some definite point in time or to travel to another country

·        the establishment of a home outside of Australia

·        the abandonment of any residence of place of abode the individual may have had in Australia

·        the duration and continuity of the individuals presence in the overseas country, and

·        the durability of association that the individual has with a particular place in Australia.

Although you have been overseas since 201X, you have not established a permanent home outside Australia as your accommodation while being employed is of a transitory or temporary nature.

You may have a lease on the property for X years, but you are not able to remain permanently in Country Y on the shore pass.

You only spend XX days in the property and that is only if you are not using your time off and annual leave to travel.

You have stated that you spend from XX to XXX in Country A and from XXX to XXX in Australia using up your days off and annual leave.

The leased property is used by you during the days you are not working. The property is a place for you to store your belongings while you are working.

As your domicile is in Australia and you have not established a permanent place of abode outside Australia, you are a resident of Australia for tax purposes under the domicile test.

3. The 183 day test

Where a person is present in Australia for 183 days during the year of income the person will be a resident unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

In your case, as you were not physically present in Australia for more than 183 days in any year of income you are not a resident of Australia under this test.

4. The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Commonwealth Superannuation Scheme (CSS) or the Public Service Superannuation Scheme (PSS), or that person is the spouse or child under 16 of such a person.

In your case, you are not a member of the CSS or the PSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not treated as a resident under this test.

Your residency status

You are a resident of Australia for taxation purposes under the domicile test.