Private ruling: Residency
Date of advice: 15 March 2017
Published: August 2017
Ruling period: Year ended 30 June 20DD | Year ended 30 June 20YY | Year ended 30 June 20ZZ | Year ended 30 June 20AA | Year ended 30 June 20BB | Year ended 30 June 20CC
Date scheme commenced: 1 January 20DD

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: You were born in Country Y. You are a permanent resident of Country Z and Australia. You were granted permanent residency of Australia in 20XX. You and your family moved to Australia in the 20YY income year to live. You rent accommodation in Australia. Your children were enrolled in school in Australia, one is still enrolled in school in Australia and the other has completed their schooling and has returned to Country Z. You have retained a property in Country Z while you have been living in Australia. The property in Country Z was rented out for a period of time. You ceased renting the property in Country Z out so you and your family could stay in it when you returned to Country Z for business, family and social commitments. Your movements in and out of Australia have been documented. Your child lives in the property in Country Z and you stay with them when you return to country Z. You have not been able to commence a business in Australia. Your main reason for returning to Country Z is for business and family reasons. Your spouse and child remain in Australia and will do so until your child completes their schooling. Neither you nor your spouse are currently or have ever been Commonwealth government employees.

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 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 . 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 ● 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | 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 IT 2650 and Taxation Ruling TR 98/ 17 Income tax: residency status of individuals entering Australia . It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. You have been living in Australia since the 20YY income year and have been a permanent resident of Australia since 20XX. You have decided to return to Country Z for business and family reasons. Your spouse and child remain in Australia and will do so until your child completes their schooling. Based on the facts above you were residing in Australia according to ordinary concepts for the 20YY, 20ZZ, 20AA, 20BB and 20CC financial years as you did not break your connection with Australia. In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. In your case you have returned to Country Z for business and family commitments. Your connection with Australia has not been broken because you have returned to Country Z for part of the time. You have spent significant time in Australia during each financial year. Your connection remains strong with Australia due to the fact that your family remain in Australia. In your case you have chosen to return to Country Z for part of the time for business and family reasons which is your reason for being overseas and you therefore remain a resident of Australia for taxation purposes. | Detailed Reasoning - Your residency status: You are a resident of Australia for the 20DD (from 1 January 20DD), 20YY, 20ZZ, 20AA, 20BB and 20CC income years. As a resident of Australia for taxation purposes you are required to declare all your income both in Australia and outside Australia. Your foreign sourced income is assessable in Australia and is required to be declared in your Australian tax returns.