Private ruling: Residency
Date of advice: 1 February 2019
Published: May 2019
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: June 20XX

Ruling: Q1: Are you a resident of Country A for income tax purposes during the period June 20XX – July 20XX? | A1: Yes | Q2: Are you a resident of Country A for income tax purposes from your date of departure July 20XX to the date of your permanent return to Country A on January 20XX? | A2: No

Relevant facts and circumstances: You were born in Country A and are a citizen of Country A. You are single with two adult children. In Month A 20XX you signed an open-ended employment contract. The contract stated the primary place of work is the Country B offices. On Month A 20XX you relocated to Country B. You maintained an Employment Pass visa in Country B and were considered a resident for taxation purposes. The visa entitled you to reside in Country B for a period of up to two years, with a renewal for a further three years. Prior to the relocation to Country B you resided with your children at in Country A. Prior to the relocation you owned two vehicles. You gave one vehicle to your child and the other you stored in your property’s garage in Country A. You did not rent out or sell your property in Country A prior to you relocating to Country B as your two adult children continued to reside in the property in your absence. Upon arrival in Country B you resided in short term accommodation while you sourced a permanent residence. From Month B 20XX you resided in an unfurnished apartment, apart from a fridge and washing machine, secured by a long term lease to which you had exclusive occupancy. You were responsible for all costs associated with maintaining the apartment including telephone, water, gas and electricity. You purchased all the household items and furniture for the apartment at a cost in excess of $10,000. You opened an account with a bank in Country B which is where your monthly salary was deposited and your day to day living expenses were paid from. You removed yourself from Country A Electoral Roll, cancelled your gym membership and advised your banks of your departure overseas. As a part of your employment duties you undertook work-related travel between Country A and Country B on a number of occasions. On your arrival and departing passenger cards you advised you were a non-resident visiting Country A on these occasions. You made three trips back to Country A for personal reasons, for durations of 17, 32 and 33 days. While in Country A during work and personal trips you stayed in your property located in Country A. You intended to remain in Country B for a period of 5 years, as allowed under the Employment Pass visa. You did intend on returning to Country A however no immediate timeline for the return had been constructed. Due to unforeseen circumstances the company you worked for in Country B entered financial hardship which resulted in you being forced to return to Country A in Month C 20XX. You are not a person who is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or the spouse of such a person.

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 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax 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 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. | Detailed Reasoning - The resides test: The ordinary meaning of the word ‘resides’, 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 o r at a particular place’. Prior to your departure on Month C 20XX you were residing in Country A according to ordinary concepts. After your departure it is accepted that you were no longer residing in Country A according to ordinary concepts until your permanent return to Country A on Month C 2018. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Country A for tax purposes if their domicile is in Country A unless the Commissioner is satisfied you have set up a permanent place of abode outside of Country A. Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. You were born in Country A and are a citizen of Country A and therefore your domicile of origin is Country A. You have not changed your domicile upon relocating | 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 Country A in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. 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. The Commissioner's view on what constitutes a permanent place of abode is contained in Taxation Ruling IT 2650 Income tax: residency- permanent place of abode outside Australia. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (a) the intended and actual length of the individual's stay in the overseas country; (b) any intention to stay in the overseas country temporarily and then move on to another country or to return to Australia at some definite point in time; (c) the establishment of a home outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence. (e) the duration and continuity of the taxpayer’s presence in the overseas country; and (f) the durability of association that the individual maintains with a particular place in Australia. Paragraph 24 of IT 2650 states that while no single factor will be decisive; factors (c), (e) and (f) seem to hold the greatest weight. You left Country A in Month A 20XX with the intention to live in Country B for a five year period. Due to unforeseen circumstances you had to return back to Country A in Month C 20XX. The actual length of stay overseas was one and a half years. You intended to reside in Country B for the two years your Visa was valid for then apply for a three year extension while still residing in Country B. You rented an unfurnished apartment, apart from a fridge and washing machine, in which you had exclusive occupancy and you were solely responsible for all costs associated with maintaining the apartment which included paying for water, electricity, telephone, gas. You purchased household items and furniture which cost in excess of $10,000. You owned a property that was your main residence while you were residing in Country A. You did not put that property up for sale or rented it out your two adult children continued to live in the property in your absence. You made three trips back to Country A for personal reasons for a total of 82 days. Your ties to Country A include a property, your two adult children that were residing in your property and a car that was stored at your property. When you came to Country A for personal and work-related travel you stayed at your property in Country A. After balancing the factors it is clear that you set up a permanent place of abode in Country B. The fact your property in Country A remained available to you while you were in Country B was due to the fact it is the residence of your adult children, it is not practical to expect you would have your children vacate the property while you were living and working overseas. It is clear you intended to remain in Country B and had you not been forced to return to Country A due to the financial difficulties of your employer it is accepted you would have stayed for the at least two years, and extended your visa for a further three years. On this basis you are not a resident of Country A under the domicile test from the date of your departure in Month A 20XX until you returned permanently to Country B in Month C 20XX. | Detailed Reasoning - The 183 day test: When a person is present in Country A 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 Country A and the person does not intend to take up residence in County A. As the Commissioner is satisfied that your usual place of abode was outside Country A during the period Month A 20XX to Month C 20XX you are not considered to be a resident under the 183 day test. | Detailed Reasoning - The Superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not treated as a resident under this test. | Detailed Reasoning - Your resident status: As you are not deemed to be a resident of Country A under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you ceased to be a resident of Country A for tax purposes from Month A 20XX until your permanent return to Country A in Month C 20XX.