Private ruling: Residency for tax purposes
Published: February 2012
Ruling period: Year ended 30 June 2006 | Year ended 30 June 2007 | Year ended 30 June 2008 | Year ended 30 June 2009 | Year ended 30 June 2010 | Year ended 30 June 2011 | Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2005

Ruling: Questions and answers: | 1. Were you a resident of Australia for tax purposes for period 1 and period 2? | Yes. | 2. Under the tiebreaker test in the double tax agreement between Australia and Country X, were you a resident of Australia, for the purposes of the double tax agreement, for period 1? | No. | 3. Under the tiebreaker test in the double tax agreement between Australia and Country X, were you a resident of Australia, for the purposes of the double tax agreement, for period 2? | Yes. | 4. Were you a resident of Australia for tax purposes for period 3? | No. | 5. Are you a resident of Australia from the end of period 3 to present? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a citizen of Country X and Country X is your country of origin. Period 1 § You moved to Australia from Country X with the intention of studying for three to four years. § You transferred money to an Australian bank account soon after arriving for personal use. § Later that year, you returned to Country X for a three week visit, before returning to Australia to study. Period 2 § You married an Australian citizen and resident. § Your first child was born in Australia. § You and your family remained in Australia until the end of period 2. Period 3 § You and your family moved to Country X for over a year, and then returned to Australia at the end of Period 3. § You and your family went to Country X to decide whether you wanted to live in Country X or Australia. § You have been in Australia since your return. § Your second child was born in Australia since your return. You own a home in Country X that was transferred into your name after your return to Australia, and prior to that was provided for your use. The home had your personal effects in it and was available for your use; it was not rented out, or made available to rent out, until it was transferred into your name. You lived in rental accommodation in Australia under long term leases. You did not purchase any property in Australia prior to your permanent return. You had furniture, clothing and cars in both Australia and Country X, however, more of these were in Country X than in Australia. You have retained your citizenship and passport for Country X. You entered Australia on a student visa. You maintained both Country X and Australian mailing addresses and telephone listings. You maintained Country X health insurance. You maintained your Country X drivers licence and also held an international drivers licence. You maintained your Country X credit card. You were the sole shareholder of a Country company, until it was wound up at the end of period 2. You maintained an investment account and various bank accounts in Country X. You held a real estate development holding that was then sold in period 2. You are the sole beneficiary of two Country X Resident Trusts. The assets of the Trusts are held in Country X, and the Trustees are residents of Country X. You have two Australian bank accounts. Your total assets in Country X are greater than your total assets in Australia. Neither you, nor your spouse, have ever been Commonwealth government employees. You believe that you are a resident of Country X for tax purposes according to their local tax laws.


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'. Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia emphasises the quality and character of an individual's behaviour while in Australia assists in determining whether the individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour: § intention or purpose of presence § family and business/employment ties § maintenance and location of assets, and § social and living arrangements. No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances. Period 1 and Period 2 In your case, you moved to Australia from Country X with the intention of living and studying here for three to four years. You did in fact lived here, and during this time married an Australian. Therefore, you were residing in Australia during this time. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency for this period. Period 3 At the end of period 3, you returned to Country X and lived there for over a year, with your wife and child. As you were living in your home country and your family accompanied you, you were not residing in Australia during this period. Therefore, you are not a resident of Australia under this test for this period. End of Period 3 to present Since returning to Australia, you have been living here with your Australian spouse and your children. Therefore, you are residing in Australia. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency for this period. | 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. Period 3 Your domicile is Country X because you were born in Country X and you are a citizen of Country X. Therefore, 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 permanent of abode is outside of Australia and they have no intention of taking up residence here. Period 3 As you were not physically present in Australia for more than 183 days you are not 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. Period 3 As neither you, nor your spouse, have ever been Commonwealth government employees 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: Period 1 and Period 2 As you meet the resides test, you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia. Period 3 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. End of Period 3 to present As you meet the resides test, you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia. | Detailed Reasoning - "Tiebreaker test": Australia and Country X have entered into a double tax agreement, which deals with the situation where a person is both a resident of Australia and Country X for tax purposes. This test is commonly referred to as the tiebreaker test. This agreement states: 3. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules: (a) he shall be deemed to be a resident solely of the Contracting State in which he has a permanent home available to him; (b) if he has a permanent home available to him in both Contracting States, or if he does not have a permanent home available to him in either of them, he shall be deemed to be a resident solely of the Contracting State with which his personal and economic relations are the closer. In your case, you are a resident of Australia for Period 1 and Period 2. You have indicated that you are a resident of Country X for tax purposes during this period. Period 1 As you did not have a spouse during this time, it is the Commissioner's view that your personal and economic ties during this period were closer to Country X than Australia, and for that reason you would not be a resident of Australia for the purposes of the double tax agreement under this tiebreaker test for this period. Period 2 It is the Commissioner's view that you are a resident of Australia for this period for the purposes of the double tax agreement. This is because, although you had a home available to you in Country X, as well as significant family and economic ties to Country X, from this time you had a spouse who is Australian and who lived in Australia with you, and then later also a child. It is the Commissioner's view that your personal ties to Australia during this time outweigh any ties you had with Country X. Period 3 You were not a resident of Australia during this time, and therefore, the tiebreaker test does not need to be considered. End of Period 3 to present It is the Commissioner's view that you are a resident of Australia for the purposes of the double tax agreement from the time that you returned to live in Australia at the end of period 3. This is because, although you have significant economic and family ties to Country X, you have a spouse and two children who are Australian and live in Australia with you. It is the Commissioner's view that your personal ties to Australia now outweigh any ties you have with Country X.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.