Private ruling: Residency
Published: August 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you a non-resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: You are a citizen of Australia and country X. Your country of origin is country X. You lived in Australia for eight years as a permanent resident prior to leaving. You have a spouse and two dependant children. Your children are school aged. You and your spouse have separated and formal proceedings are expected to start soon. Your separation has been amicable. You departed Australia to move permanently to country Y on your own. Your spouse and children have remained in Australia in a house currently owned by you and your spouse. You currently have a business visa which is for commercial and trade activities for a period of no more than six months. When it expires you will apply for a work visa. The work visa has to be renewed every year and allows you to live in country Y for a year if you are sponsored by an employer. Your own company is sponsoring you for the work visa. You moved to country Y for more opportunities to develop your company. You do not intend to return to Australia for at least ten years, only for short visits to visit your children. You intend to return to Australia every 3-4 months for approximately two weeks at a time. When you return to Australia you stay at the marital home until the divorce is finalised and then you will stay elsewhere. You are currently renting an apartment in country Y. Your assets in country Y include two bank accounts. You have established and own a company in country Y. Your assets in Australia include a bank account, two cars, your house and two investment properties. However you are transferring your share of the house and one of the investment properties to your spouse. You receive Australian sourced income which is rental income from your investment properties and income from your company. In country Y you have joined a sporting club but you are mainly concentrating on the running of your company. Neither you nor your spouse have been Commonwealth Government of Australia employees. You will lodge tax returns in country Y.

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

Reasons for decision: Detailed Reasoning - Residency: 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | 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 different 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 Taxation Ruling TR 98/17 Income Tax: residency status of individuals who enter Australia , and Taxation Ruling IT 2650 Income Tax: residency status of individuals who temporarily live outside Australia. Taxation Ruling TR 98/17 states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. 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 left Australia to move to country Y for an indefinite period of time. | 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. • Your country of origin is country X and you are a citizen of Australia and country X. | Detailed Reasoning - (iii) History of residence: You lived and worked in Australia for eight years prior to moving to country Y. | 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. • You are living in country Y and have signed a lease on a rental apartment. • You have moved to country Y to develop your company which you have established there. • You have joined a local tennis club but are mainly concentrating on running your company. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You intend to visit Australia for short visits such as two week periods every few months. You intend to visit a total of four times a year. You do not intend to return to Australia permanently for at least the next ten years. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You moved to country Y to develop your company which you have established there. Your visits back to Australia are to see your children. | Detailed Reasoning - Family: No family members have accompanied you to country Y. Your spouse, who you have separated from, remains in Australia with your two children. | Detailed Reasoning - Business or economic: Your home, household effects and an investment property in Australia are being transferred to your spouse. You will keep one investment property in Australia. Your assets in country Y include your company and two bank accounts. | Detailed Reasoning - (viii) Maintenance of Place of abode: You are living in a rental apartment in country Y. You are not maintaining a place of abode in Australia as you are transferring your share of the property to your spouse as part of the divorce settlement. | Detailed Reasoning - Summary - resides test: You will not be residing in Australia due to the following factors: • you are living in country Y and have signed a lease on a rental apartment • you intend to live in country Y and not return to Australia for at least ten years • you do not intend to return to Australia other than short visits to see your children • you have separated from your spouse who remains in Australia • you are transferring most of your Australian assets to your spouse as part of the divorce settlement, and • you have moved to country Y to develop your company which you have established there In consideration of the factors outlined above, you will not be residing in Australia according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the 183 day test, superannuation fund test and domicile and permanent place of abode tests. | Detailed Reasoning - Domicile and permanent place of abode: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. IT 2650 states that: Persons leaving Australia temporarily would generally be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. | Detailed Reasoning - Application to your circumstances: Your domicile is Australia because you are still an Australian citizen. Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - 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 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode: i. the intended and actual length of the taxpayer's stay in the overseas country; ii. 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; iii. 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; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. 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. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Consideration of these factors: • You intend to live in country Y for at least the next ten years • The purpose of you moving to country Y is to establish your company. • You live in rental accommodation in country Y. • You are transferring most of your Australian assets to your spouse. • You will only be returning to Australia for short visits to see your children. The Commissioner is satisfied that you will have a permanent place of abode outside of Australia. | Detailed Reasoning - 183 day: 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. As you will not be in Australia for more than one-half of the relevant income years this test is not relevant to your circumstances. | Detailed Reasoning - Superannuation fund test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, 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. Neither you nor your spouse have ever been Commonwealth Government employees. | Detailed Reasoning - Conclusion - your residency status: As you do not meet any of the above tests, you are not a resident of Australia for income tax purposes.