Private ruling: Residency
Date of advice: 24 June 2016
Published: August 2016
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you a resident of Australia for income tax purposes while you lived in Country A? | A1: No

Relevant facts and circumstances: You are an Australian Citizen. You left Australia during the year ended 30 June 20XX to live in Country A. You intended to stay in Country A for between two and three years. You stayed in Country A for just under 2 years. You rented a house on a 12 month lease that reverted to a periodic lease after the 12 month period expired. Prior to leaving to go to Country A you and your family lived in a leased property. You finalised the lease before leaving Australia. You own two investment properties in a different town in Australia that you have never lived in. These properties were available for rent while you were in Country A. You worked in Country A while you were living there. Your children were enrolled and attended the local school. You had a two year working visa. You and your spouse purchased two motor vehicles, household furniture and mobile phones in Country A. You and your spouse were members of your local church in Country A. Your Australian mail was redirected to your parents while you were in Country A. You did not return to Australia during the time you spent in Country A. Your private health insurance was suspended indefinitely prior to leaving Australia and reactivated after you returned. You left Country A two days before your visa expired. You planned the departure 4 months before the expiry of the visa. You and your spouse decided not to extend your visa for a further two years and decided to return to Australia to be closer to family. While in Country A you made a lot of friends and celebrated Country A holidays with your neighbours and friends. Neither you nor your spouse, are members of a Commonwealth Government superannuation fund.

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

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are foreign resident for taxation purposes, your assessable income includes only income 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 an Australian resident for income tax purposes. These tests are: • The resides test. • The domicile test. • The 183 day test. • The superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650. 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests. | Detailed Reasoning - The resides test: The ordinary meaning of the word reside, according to the dictionary definition, is to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place. As you were residing outside of Australia, you are not considered to be residing in Australia during the time you spent in Country A. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice by operation of law. In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. In your case you advised that you moved to Country A as a dependant to your spouse who was on a 2 year working visa. Your spouse and children travelled to Country A and you were living permanently in Country A in a family house you had leased for a period of 12 months that reverted to a periodic lease. You intended to remain in Country A for a period of two to three years, however only remained in Country A for just under two years. You have now returned to Australia permanently and you have Australian investment property. After weighing the above factors, it is considered that your domicile continued to be Australia during the time you were in Country A | 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. Although you maintained an association with Australia through your property and family, your associations with Country A were more significant as: • You resided in Country A for almost two full years; • You obtained long term rental accommodation in Country A; • You opened a bank account in Country A; • Your spouse and children moved to Country A • Your children were enrolled in the local school • You created and maintained social connections within your local community in Country A; and • You purchased two motor vehicles, mobile phones and household furniture in Country A. Based on these facts, it is therefore considered that you have established a permanent place of abode in Country A. Therefore, you are not considered to be an Australian resident under the domicile test. | Detailed Reasoning - The 183 day test: When 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. You do not satisfy this test as you have established a permanent place of abode outside of Australia. | 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 an Australian resident under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you ceased to be a resident from the date of your departure from Australia, until you returned to live permanently in Australia.