Private ruling: Residency
Published: June 2013
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ending 30 June 2013 | The scheme commenced on: | 1 July 2009

Ruling: Question and answer | Are you a resident of Australia for tax purposes? | No.

Relevant facts and circumstances: Your country of origin is Country Z. You are a citizen of Australia. You departed Australia on the year ending 30 June 20XX. You lived in Country Y September 20YY until the year ending 30 June 20ZZ. You moved to Country X in the year ending 30 June 20XX and continue to live there. You have resided in Country X on 12 month visas since you arrived. You have lived at the same address since first arriving in Country X. You intend to stay in Country X indefinitely (5 or more years). You spend less than 183 days in Australia each income year. You do not have a spouse or children. You have a Country X drivers licence. You have a residential property in Australia that is not available to you as it has been rented out since you acquired it in 2009.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: 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 (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, and · the superannuation test. 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 considered to 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 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: · whether the person is physically present in that country at some time during the year of income · the history of the person's residence and movements · if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits · if the person is outside the country for part of the relevant income year, the purpose of the absences · the family and business ties which the person has with the particular country, and · whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. In your case, you are living and working in Country X indefinitely. You have a dwelling in Australia that is not available to you, as it is rented. You departed Australia the year ending 30 June 20XX and not lived in Australia since. You intend to remain in Country X for a minimum for 5 years. You have established a home outside Australia by renting a property for numerous years as well as receiving a Country X driver's licence and your employment remains in Country X. Your behaviour over the time spent in Australia does not reflect a degree of continuity, routine or habit that is consistent with residing in Australia. You are not residing in Australia according to the ordinary meaning of the word. Therefore, you are not a resident of Australia under this test. The three statutory tests of residency must now be considered. | Detailed Reasoning - The domicile 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 is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Australia because you are an Australian citizen, and although your country of origin is Country Z, you moved from there to Australia permanently and took up Australian citizenship. There is no indication that you have taken steps to change your domicile to Country X. Permanent place of abode 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 courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: · the intended and actual length of the taxpayer's stay in the overseas country; · whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; · whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; · whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; · the duration and continuity of the taxpayer's presence in the overseas country; and · the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. In your case, the Commissioner is satisfied that you have a permanent place to of abode in Country X for the following reasons - your residency visa in Country X lasts for 12 months and can be renewed. You have lived in and rented the same property in Country X since 2007 and you have a Country X drivers licence. Therefore, although your domicile is Australia, as the Commissioner is satisfied that you have a permanent place of abode outside of Australia, you are not a resident of Australia under this test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. In your case, as you do not intend to be in Australia for more than 183 days in an income year, you will not be a resident of Australia under this test. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds: · established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or · established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or · the spouse or child under 16 of a person covered by either of the above funds. As you have never been an Australian Commonwealth government employee and therefore you are not able to contribute to the abovementioned superannuation schemes and are not a resident of Australia under this test. | Detailed Reasoning - Your residency status: As you do not meet any of the above tests, you are not a resident of Australia for tax purposes. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.