Private ruling: Residency
Date of advice: 29 August 2017
Published: December 2017
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Australia for taxation purposes after your child relocated to Australia? | A1: No

Relevant facts and circumstances: You were born in Australia. You are an Australian citizen. You are a non-resident of Australia for tax purposes. You are employed by a relevant company (the Company) in foreign territory X. You have been employed by the Company on a permeant basis. You departed Australia. You were holding a valid work visa in foreign territory X; after several years of full-time employment and residing, you were granted permanent residency; you are now a resident of foreign territory X. Your employer does not provide accommodations; you receive a rental allowance from your employer. You have been residing in a rented property. As an employee of the Company, you visit Australia quite often for work purposes; you stay in the delegated hotels in a number of capital cities. You have visited Australia as a tourist to visit family and vacation on numerous occasions; you stay at hotels or with friends and relatives. You own Australian properties: You lodge Australian tax returns to report rental income as a non-resident. Your child was born in foreign territory X and adopted by you. Your child has been residing with you since they were adopted. Your child will attend full-time boarding school in Australia; you are planning to increase the frequency of the visits to Australia to visit your child and parents. Your employer will provide you with school allowance for your child’s education. You have a Drivers Licence. You own a motor vehicle, bank accounts and a provident fund in foreign territory X. You intend to reside in foreign territory X permanently. You are a member of the local Club. You do not have any social or sporting connections with Australia. You have advised your financial institutions that you are a non-resident for taxation purposes. You have cancelled your private health insurance in Australia. You are not on the Australian electoral roll. You lodge income tax returns and pay tax in foreign territory X. Neither you nor your spouse is an employee of the Australian Commonwealth government.

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

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). The terms ‘resident’ and ‘resident of Australia’, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: ● the resides test, ● the domicile (and permanent place of abode) test, ● the 183 day test, and ● the superannuation 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. In your case, you have been living in foreign territory X for a period of several years and are a non-resident for tax purposes. As a non-resident, you have broken your association or connection with Australia. Although your child will be attending boarding school in Australia and you’re planning to increase the frequency of visits to Australia to visit, you remain in foreign territory X. You intend to reside in there permanently. As such, you will still be considered to be residing in foreign territory X until you return to Australia permanently. Therefore, you are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied the person’s permanent place of abode is outside Australia. A person’s domicile is generally their country of birth. This is known as a person’s ‘domicile of origin’. A person’s domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. You were born in Australia and you are an Australian citizen. You were granted foreign territory X permanent residency. You have no intention to permanently resettle in Australia. By obtaining permanent residency, foreign territory X became your domicile of choice. You are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied 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 of Australia for taxation purposes under this test as you will not be in Australia for 183 days or more while you are based in foreign territory X. | Detailed Reasoning - Superannuation test: Based on the information you have provided, neither you nor your spouse is an employee of the Australian Commonwealth government, you are not eligible to contribute to certain superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years. You are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - Conclusion – your residency status: Based on the facts you have provided, you do not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Therefore, you are not a resident for taxation purposes in the relevant financial years. | Detailed Reasoning - Further information: The Commissioner does not rule for indefinite or extended periods of time as there may be changes to the facts of the arrangement or the law relating to residency. Also, a public ruling may issue which affects the private ruling.