Edited version of private advice

Authorisation Number: 1051785937309

Date of advice: 3 December 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Y.

You are a citizen of Australia.

You are a fly in fly out worker in Country Z.

You enter Country Z on a work visa.

This work visa does not allow you to remain permanently in Country Z.

You have been working for the same company in Country Z for the past 12 months and intend on working in Country Z for the next 2 years with the possibility of the contract being extended.

You work 9 weeks on and 6 weeks off.

You return to both Australia and Country Y during your 6 weeks off.

Your spouse and child remain in Australia.

Your spouse is self- employed, and you do not financially support your spouse or child.

You spent XX days in Country Y on your days off in the 20XX income year.

You stay with your parents in Country Y.

You visit your parents as they are aging.

You do not intend on living in country Y on a permanent basis.

You spent XXX days in country Z working.

You live in employer provided accommodation in Country Z.

You spent XXX days in Australia on your days off.

You stay with your spouse and child in your home in Australia.

The home in Australia is jointly owned by you and your spouse.

You have a joint bank account with your spouse in Australia.

Your employer pays for your trips from Country Z to Country Y and from Country Z to Australia.

You have no assets in Country Y or Country Z.

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

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

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) of the ITAA 1997).

The terms resident and resident of Australia, regarding 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 tests

3.    the 183-day test

4.    the superannuation tests

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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

1. 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'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

The question of whether an individual 'resides' in a country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered the following factors as being relevant:

(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.

The 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.

You are a fly in fly out worker in Country Z.

You have a work visa to enter Country Z and this visa does not allow you to remain permanently in Country Z.

You work 9 weeks on and 6 weeks off and you spend the majority of your days off in Australia and you also visit your aging parents in Country Y.

Your spouse and child remain in Australia in the family home.

You stay with your family at the family home when you return to Australia.

Based on the facts you have provided to us you have not broken your connection with Australia and you are still residing in Australia according to ordinary concepts as you are a fly in fly out worker in Country Z and you return to Australia on your days off. You spend a small amount of time visiting your aging parents in Country Y.

You are a resident under this test.

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.

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 choice is Australia as you are an Australian citizen.

Your domicile has not changed since you have been working in Country Z. Since your domicile is Australia, you will be a resident of Australia under this test unless the Commissioner is satisfied you have a permanent place of abode outside Australia.

Permanent place of abode

The expression permanent 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 persons 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 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 individual's presence in the overseas country, and

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

You work in country Z as a fly in fly out worker.

You live in employer provided accommodation in Country Z.

You return to Australia on your days off from work in Country Z.

You make visits to your parents in Country Y and you stay with your parents while in Country Y.

You have no intentions on living in Country Y permanently.

The Commissioner is not satisfied that you have a permanent place of abode outside Australia due to the above reasons.

You are a resident under this test.

Your residency status

You are a resident of Australia for taxation purposes for the 20XX income year.