Private ruling: Residency3
Published: February 2014
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2012

Ruling: Question and answer: | Will you be a resident of Australia for income tax purposes for the years ending 30 June 2015 to 2018? | No.

Relevant facts and circumstances: You were born in country X and are a citizen of country X. You moved to Australia and became a citizen of Australia. You have children in Australia who live with your former spouse. You entered into an employment contract with a company based in country Y commencing in 20XX which will be of an ongoing nature with no fixed term. You are living and working in country Y for an indefinite period of time and do not intend to return to Australia to live. You have a work and residency permit which will allows you to live and work in country Y. You have private rental accommodation in country Y and the lease is for one year duration. Under your employment contract you will be entitled to four weeks annual leave, some of which may be spent in Australia visiting your children. You may spend approximately one week a year in Australia to see your family. You sold your house in Australia. Apart from your family you have no social or sporting connections in Australia. In country Y you have joined an expatriate club and you are secretary of a sporting division. You also spend time socialising with friends and colleagues of various nationalities, some of who live in the apartment complex and others outside the complex. You have a bank account in country Y and you also own a car and all the furniture and belongings in your rental apartment which were shipped from Australia when you re-located to country Y in 20XX. You are due to be married soon to an Australian resident. Your spouse will live with you in country Y but return to Australia three to four times a year to maintain their business interests. Neither you nor your spouse have ever been employed by the Australian commonwealth government.


Reasons for decision: Summary: Generally 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 within the tax provisions and provides four tests to ascertain the residency status. These tests are: • the resides test, • the domicile test, • the 183 day test, and • the Commonwealth superannuation fund 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. 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'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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 with Australia compared to the foreign country concerned, and (viii) maintenance of a place of abode. You have been living and working in country Y since 20XX and intend to be there for an indefinite period of time. You will not be residing in Australia according to the ordinary meaning of the word and will not meet 'the resides' test from when you left Australia. | 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 domicile and permanent place of abode test, the 183 day test and superannuation fund test. | 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. | Detailed Reasoning - Domicile: 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. In your case, your domicile at birth was the country X. However, you moved to Australia and became an Australian citizen. Therefore, your domicile is now Australia and remains Australia until you establish a new domicile in a country other than Australia. 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: A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere (paragraph 14 of IT 2650). 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. 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. In your case, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia for the following reasons: • your employment contract will be ongoing and will have no fixed term • you intend to stay living and working in country Y indefinitely • you have established private rental accommodation in country Y with your own furniture and belongings • your spouse will be residing with you in country Y • you have sold your house in Australia and will have no residence available to you in Australia • you have no plans to return to Australia to live and • you have established social and sporting associations in country Y. As the Commissioner is satisfied that you have a permanent place of abode outside Australia, you are not a resident of Australia for income tax purposes under this test. | Detailed Reasoning - The 183-day test: Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that your usual place of abode is outside Australia and you have no intention to take up residence here. You will not be present in Australia for more than 183 days in the years ended 30 June 2015, 2016, 2017 and 2018. Thus, you are not a resident under this test. | Detailed Reasoning - The superannuation test: You will be a resident if you are eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or you are the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. Neither you nor your spouse, were a member of a relevant superannuation scheme and not an eligible employee for the purposes of the Superannuation Act 1976. Therefore, this test does not apply to you. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not an Australia resident for income tax purposes.