Private ruling: Residency
Date of advice: 25 October 2016
Published: February 2017
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY | Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 1 January 20YY

Ruling: Q1: Are you a resident of Australia for taxation purposes when you move to Country B? | A1: No.

Relevant facts and circumstances: You were born in Australia and you are a citizen of Australia. You intend on moving to Country B to live and use as a base for your work. You will be in Country B for X months of each year. You will spend less than 6 months travelling for work duties in in various countries. You will spend approximately Z month in each country performing work duties. You will spend less than 6 months in Australia visiting your family each year. You intend on renting an apartment in Country B which will remain empty for the remaining months you will be in other countries working and in Australia. You will enter Country B on a business visa. You will have a resident permit for Country B. You will commence a XYZ business in Country B. You have a home in Australia which your ex-spouse remains living in with your children. You pay family assistance for your children. You have a bank account in Country B. You currently live in a fully furnished rented apartment in Australia which you will cease renting when you move to Country B. You will stay with friends and in hotel style accommodation in Australia when you return to visit your family and children. You do not have a permanent home available to you in Australia. You are not eligible to contribute to Commonwealth super funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1). | 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 . 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: ● 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. You intend on going to Country B to live and work. You will commence an XYZ business in Country B and enter Country B on a business visa. You will use Country B as a base to carry out your work duties in various countries. You will rent an apartment in Country B. You will spend less than 6 months in Australia visiting your family and children. You will stay with friends and in hotel style accommodation when you are visiting Australia. You will not work in Australia. Based on the facts above for the period you are living and working in Country B you will not be a resident of Australia for taxation purposes as you will not maintain a continuity of association with Australia. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be 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 to prove an intention to make his or her home indefinitely in that country. Your domicile of origin is Australia. 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. The Commissioner is not satisfied that you will set up a permanent place of abode outside Australia for the following reasons: ● You will rent an apartment in Country B ● You will commence a business in Country B ● You will only return to Australia to visit family and friends You are not a resident under this 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 will not be in Australia for more than 183 days in any financial year. You are 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 Commonwealth super funds, 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 are not eligible to contribute to the relevant Commonwealth super fund. You are not a resident under this test. | Detailed Reasoning - Your residency status: You are not a resident of Australia for taxation purposes for the period you are living and working in Country B.