Private ruling: Residency of Australia for taxation purposes
Date of advice: 13 August 2018
Published: October 2018
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you a resident of Australia for income tax purposes? | A1: Yes

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 worked as a consultant in Country Y. In XX 2018 you commenced working in Country Z. You had a residency permit to work in Country Y. The permit did not allow you to remain permanently in Country Y. You lived in employer provided accommodation in Country Y which was fully furnished. The accommodation was for your sole use. You were able to have visitors to the accommodation. You took personal clothing and toiletries to Country Y with you. Your income derived while in Country Y was banked into an Australian bank account. You were not a resident of Country Y for taxation purposes. You did not pay tax in Country Y. You did not pay tax in Country R on your Country Y derived income. You entered Country Z on a relevant travel pass. The travel pass does not allow you to remain permanently in Country Z. You live in a secure compound in Country Z. You are not able to have visitors to the compound. You took clothing and toiletries to Country Z with you. Your income derived while in Country Z will be banked into an overseas bank account. You are not a resident of Country Z for taxation purposes. You will not pay tax in Country Z. You will not pay tax in Country R on your income derived in Country Z. You have had a number of contracts overseas in a number of countries. You have moved from country to country based on your contracts. You have no spouse or dependants. Your parent is living in your house in Australia. You have a rental property in Australia which is being rented out. You were not in Australia for more than 183 days in the 2017 and 2018 income years. You are not eligible to contribute to the PSS or the CSS Commonwealth Super funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1) Anti-avoidance rules | The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the low risk PART IVA list as specified in ORCLA.

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' and 'permanent place of abode' test ● the 183 day test; and ● the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation 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. (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; (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. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. 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 Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): 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. Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62): Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1. You have been working in Country Y and Country Z during the 2017 and 2018 income years. You have only been back to Australia for short visits during this period. Based on the facts above you were not residing in Australia according to ordinary concepts. You are not a resident under this test. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the 183 day test, superannuation fund test and domicile and permanent place of abode tests. | Detailed Reasoning - Domicile and permanent place of abode: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. Your domicile is Australia. As your domicile remains in Australia, you will be an Australia resident unless the Commissioner is satisfied that you have a permanent place of abode outside of 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. It is clear from the case law that a person’s permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. The expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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. Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia to live overseas ceases to be an Australian resident during the absence. IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode: ● the intended and actual length of stay in the overseas country ● any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country ● the establishment of a home outside Australia ● the abandonment of any residence or place of abode in Australia ● the duration and continuity of presence in the overseas country, and ● the durability of association with a particular place in Australia. As highlighted in paragraph 25 of IT 2650, as a broad rule of thumb, a period of about two years or more would generally be regarded as a substantial period for the purposes of a taxpayer's stay in another country. It must be stressed, however, that the duration of the taxpayer's actual or intended stay out of Australia is not, of itself, conclusive and needs to be considered with all of the factors. The commissioner is not satisfied that you had a permanent place of abode outside Australia for the following reasons: ● you lived in employer provided accommodation in both Country Y and Country Z ● you were not able to remain permanently in either Country Y or Country Z ● Since leaving Australia you have had a number of different contracts and have not settled in one place You are a resident under this test. | Detailed Reasoning - The 183-day test: Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that: ● their usual place of abode is outside Australia ● they have no intention to take up residence in Australia The term ‘usual place of abode’ is not the same as ‘permanent place of abode’. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country. You were not in Australia for more than 183 days in the 2017 and 2018 income years. You were not a resident under this test. | Detailed Reasoning - The superannuation test: This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age). A person is a resident under this test if they are: ● a member of the superannuation scheme established by deed under the Superannuation Act 1990 ; or ● an eligible employee for the purposes of the Superannuation Act 1976 ; or ● the spouse, or a child under 16, of a person covered by either of the above. You are not eligible to contribute to the PSS or the CSS Commonwealth Super funds. You are not a resident under this test. Residency status: You are a resident of Australia for taxation purposes in the 2017 and 2018 income years. You are required to declare the income derived in Country Y and Country Z in your Australian tax return.