Private ruling: Residency
Date of advice: 8 October 2014
Published: November 2014
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2014

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 were born in Australia and you are a citizen of Australia. You are not a permanent resident of any other country. You left Australia to go to a foreign country to live and work. You entered a foreign country on a visa. This visa soon expires. This visa does not allow you to stay permanently in a foreign country. You have been employed. Your employment is full-time with no specific end date. You left your job in Australia before moving to a foreign country. You do not have a job or position being held for you in Australia. You are currently going through the process with your employer of qualifying for a different visa. You will return to Australia briefly to send your passport to the visa application centre to receive your new visa. You will then immediately return to the same foreign country and continue living and working there for the foreseeable future. Your partner accompanied you to a foreign country. You and your partner rent a property in the foreign country. You have a bank account in the foreign country into which your pay is deposited. You have purchased some household effects. Your household effects in Australia are stored at you parent’s place. You have a bank account, car and household effects in Australia. You have two bank accounts in Australia from which you derive interest income. You lived with your parents in Australia prior to going to the foreign country. In addition to your parents, you have friends in Australia. In the foreign country, you have friends as well as your partner. Neither you nor your partner are currently or have ever been Commonwealth Government employees. You have cancelled your private health insurance in Australia. You have not advised the Australian Electoral Office to have your name removed from the electoral roll. You are over 16 years of age. When completing the Australian Immigration Outgoing passenger card you stated to live and work as your reason for leaving.

Relevant legislative provisions: Income Tax Assessment Act 1936 S ubsection 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 (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 Australia and the overseas country or 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 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 - (i) 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 have gone to a foreign country to live and work. At this stage you have no plan to return to Australia. | Detailed Reasoning - (ii) 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 Australia. You have not been granted permanent residency in any other country. | Detailed Reasoning - (iii) History of residence and movements: You lived with your parents in Australia prior to going to a foreign country to work. | Detailed Reasoning - (iv) 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. Prior to going to a foreign country you worked and lived in Australia with your parents. You work in a foreign country. You rent a property in a foreign country. Your partner has accompanied you to a foreign country. | Detailed Reasoning - (v) 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. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia. You have not returned to Australia since leaving. You will return to Australia briefly when your current visa expired. Once you have obtained your new visa you will immediately return to a foreign country and continue living and working there for the foreseeable future. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You have gone to a foreign country to live and work. You will return to Australia for less than a month, until you obtain your new foreign country visa. | Detailed Reasoning - (vii) 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. Family Your partner has accompanied you to a foreign country. Your parents remain in Australia. Business or economic ties You have work in a foreign country. You intend on staying there indefinitely. Your employer is sponsoring your new visa. Assets You have a bank account and house hold effects in a foreign country. You have a bank account and household effects in Australia. | Detailed Reasoning - (viii) 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. You do not have a home 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 ceased to be a resident of Australia. Specifically: ● since leaving Australia, you have lived and worked in a foreign country ● you live there with your partner in a home you have established in rented accommodation ● your foreign country employer is sponsoring your application for new visa ● you have no plans to return to Australia ● you will return to Australia for a short while you obtain your new visa. Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the relevant period. | Detailed Reasoning - The domicile and permanent place of abode test: 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. 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. As you are still an Australian citizen while living in a foreign country, your domicile is Australia and remains unchanged. 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. You have established a home with your partner in rented accommodation where you have lived since leaving Australia. You do not have a home in Australia The Commissioner is satisfied you have a permanent place of abode outside of Australia. Therefore, you will not be a resident of Australia under the ‘domicile and permanent place of abode’ test of residency. | 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 are not a resident under this test as you will not be in Australia for 183 days or more in an 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. Neither you nor your partner is eligible to contribute to the CSS and PSS. You are not a resident under this test. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes for the years of the ruling.