Private ruling: residency
Date of advice: 24 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2012

Ruling: Q1: For the financial years 2012 - 13 to 2016 - 17 were you a resident of Australia for taxation purposes? | A1: No

Relevant facts and circumstances: You left Australia during 201A with your spouse and child. You started an employment contract in 201B in Country Z which was to continue for X years overall. You were granted a work visa by your employer in Country Z which allowed you to stay for two years and can be renewed. You had no intention of returning to Australia to live. Your spouse at the time was a local of Country Z and you could have applied for a different visa if you did not have a working visa. You exported your household and personal effects in Australia to Country Z. You left a sporting and church congregation. You let your Medicare Card, health and car insurance expire. You advised your superfund that you were leaving permanently once you left your employment. On incoming and outgoing passenger cards, you stated you were a resident of Country Z. After first departing Australia, you came back usually once every year during the school holidays to visit your family. After arriving in Country Z, you joined a number of associations and enrolled in University in order to seek long term work. You also bought a car and applied for car insurance. You divorced in 201C, but still aimed to live in Country Z long term to raise your first child. Upon divorce, you had joint custody of your child, however once you lost your job and you could not live in Country Z on a work visa and consequently, you gave up joint custody. You did not intend to return to Australia but due to your marriage breakdown and work contract was not renewed, you had no choice and to return and find work. In Australia, you had your parents to support you. You returned to Australia during 201F. You were not in Australia for more than 183 days for the 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 financial years. You and your spouse are not eligible to contribute to the relevant Commonwealth super fund.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5. | Income Tax Assessment Act 1997 subsection 995-1.

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 995-1 of the 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). 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, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: ● resides test ● domicile and permanent place of abode test ● 183 day test and ● Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - The resides (ordinary concepts) test: 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 to different countries (viii) Maintenance of place of abode. These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Income tax: residency – permanent place of abode outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia . It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. You intended to leave Australia permanently and began residing in Country Z with your spouse from 201A. On incoming and outgoing passenger cards, you stated you lived in Country Z. You started an employment contract in 201B in Country Z which was to continue for X years overall. You were granted a work visa by your employer in Country Z which allowed you to stay for two years and can be renewed. Your spouse at the time was a local of Country Z and you could have applied for a different visa if you did not have a working visa. You exported your household and personal belongings in Australia to Country Z. You were not residing in Australia according to ordinary concepts due to your ongoing employment, living arrangements and intention to remain living and working overseas. | Detailed Reasoning - Domicile: "Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law ( Henderson v. Henderson [1965] 1 All E.R.179; Udny v. Udny [1869] L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.)) . In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1) of the ITAA 1936, it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency e.g., the end of his or her employment. On the other hand, if that person has in mind only a vague possibility of returning to Australia, such as making a fortune (a modern example might be winning a football pool) or some sentiment about dying in the land of his or her forebears, such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country - see In the Estate of Fuld (No. 3)(1968) p. 675 per Scarman J at pp. 684-685 and Buswell v. I.R.C (1974) 2 All E.R. 520 at p. 526. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. Your domicile of origin is Australia. You have moved to Country Z indefinitely with your spouse and child; however there is no evidence that it is your intention to remain there should your employment cease. Although you stated it is your intention to reside in Country Z indefinitely, you did not make significant steps to acquire permanent residency in Country Z. Therefore on this basis you would maintain your domicile of origin being Australia. | Detailed Reasoning - Permanent place of abode: 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 return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. Although you are maintaining an association with Australia through your property, your associations with Country Z are more significant as: ● You brought all your household and personal effects from Australia to Country Z; ● You obtained employment in Country Z; ● You bought a car and applied for car insurance; ● You joined a number of associations in Country Z; ● You enrolled in university seek long term work in Country Z; and ● Your spouse and child moved to Country Z. Based on these facts, it is therefore considered that you have established a permanent place of abode in Country Z. Therefore, you are not considered to be an Australian resident under the domicile test. | Detailed Reasoning - 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. You were not in Australia for more than 183 days in any of the applicable financial years. You were not a resident under this test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You and your spouse are not eligible to contribute to the relevant Commonwealth super fund. You were not a resident under this test. Based on the facts you have provided, we can conclude that you have not satisfied any of the tests of residency. Accordingly you were not a resident of Australia for income tax purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.

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