Private ruling: Residency
Published: February 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Question and answer: | Are you a resident of Australia for taxation purposes for the period you are in a foreign country? | No.

Relevant facts and circumstances: You are a citizen of a foreign country. Your country of origin is the foreign country. You came to Australia with the purpose of applying for Australian residency. You were granted permanent residency status. You have had health issues requiring treatment in the foreign country and again in Australia. Your purpose in moving to the foreign country is to continue your medical treatment. You departed Australia for the foreign country. You will remain in the foreign country for a couple of years before returning to Australia. You hold a passport for a foreign country so you do not require a visa to enter the foreign country. You do not have a return airline ticket. You may return to Australia to visit a relative but not for periods totalling more than six months in any income year. While you are in the foreign country you will live with your spouse. You have no assets overseas. You purchased a house in Australia. It was your main residence for the time you were in Australia. This house is going to be sold shortly when market conditions are more favourable. In addition, you hold the following assets in Australia: · XXXX Your household effects are going to be sold. You are receiving investment income from Australia. You will not have employment overseas. You will not have a position or job being held for you while you are overseas. Your social and sporting connections with Australia are friends and a relative Your social and sporting connections with the foreign country are family and friends including your spouse and parents. Neither you nor your spouse has ever been a Commonwealth Government of Australia employee for superannuation purposes. You have never had the right to vote in Australia. You have advised Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted. You have advised Australian companies with whom you have investments that you are a foreign resident. You will cease paying private health insurance premiums. On your outgoing passenger card you stated that you were temporarily leaving Australia for the next three years. You are over the age of 16 years.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Summary: 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 for income tax purposes. These tests are: · the resides test · the domicile test · the 183 day test · the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650). 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. | Detailed Reasoning - 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'. 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: · Physical presence in Australia · Nationality · History of residence and movements · Habits and "mode of life" · Frequency, regularity and duration of visits to Australia · Purpose of visits to or absences from Australia · Family and business ties to different countries · 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 IT 2650 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. | Detailed Reasoning - Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this the AAT has stated that: Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. 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 moved to Australia and were granted permanent residency status. You may return to Australia to visit a relative but not for periods totalling more than six months in any income year. | Detailed Reasoning - Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. You are a citizen of the foreign country. | Detailed Reasoning - History of residence: You have lived in Australia. | Detailed Reasoning - Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. You have lived in Australia and have had permanent residency status. You own a house in Australia which was your main residence. The house will be sold shortly. You have gone to the foreign country for medical treatment after which you will return to Australia in a couple of years. You may return to Australia to visit your relative but not for periods totalling more than six months in any year. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. You may return to Australia to visit your relative but not for periods totalling more than six months in any year. | Detailed Reasoning - Purpose of visits to or absences from Australia: Your purpose in moving to the foreign country is to continue your medical treatment. You will remain in the foreign country for a couple of years before returning to Australia. | Detailed Reasoning - Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: Your spouse lives in the foreign country. Your relative lives in Australia. You have family ties in Australia as well as in the foreign country. | Detailed Reasoning - Business or economic ties: You have no income and employment in the foreign country. You have no employment in Australia. | Detailed Reasoning - Assets: You have no assets overseas. You hold assets in Australia. | Detailed Reasoning - Maintenance of place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. Currently, you have a place in Australia which is your place of abode. However, after you sell it, you will no longer be maintaining a place of abode in Australia. | Summary: As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically, you: · are a citizen of the foreign country · are moving to the foreign country for at least a couple of years · intend selling your home in Australia and will dispose of your household effects · will live with your spouse while in the foreign country. Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts under the resides test as you will not maintain a continuity of association with Australia for the period you are in the foreign country. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. 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. Your domicile of origin is the foreign country. You adopted a new domicile of choice in Australia upon applying for permanent residency. However, as you have moved back to the foreign country and are a citizen of that country, you have reactivated your domicile of origin. Your domicile is the foreign country. You are not a resident under this test. | Detailed Reasoning - The 183-day test: When a person is present in Australia for 183 days or more 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 may return to Australia to visit your daughter in Australia but not for periods totalling more than six months in any income year. You are not a resident under this test as you do not intend being in Australia for 183 days or more in any income year. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Only Commonwealth Government employees are eligible to contribute to the CSS and PSS. As you and your spouse were not a Commonwealth Government of Australia employee and you are over the age of 16 you will not be treated as a resident under this test. | Detailed Reasoning - Your residency status:: As you have not met the conditions of any of the four tests of residency, you will not be a resident of Australia for taxation purposes for the period you are in the foreign country.