Private ruling: Residency
Date of advice: 9 September 2015
Published: September 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 10 June 2014

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

Relevant facts and circumstances: You and your spouse were born in Australia. You and your spouse are citizens of Australia. You and your spouse travelled to a foreign country with the intention to live and work for an extended period then return to Australia. You and your spouse lived and worked in a foreign country on a working holiday visa. On your incoming and outgoing passenger cards you and your spouse stated that you were residents of Australia. You and your spouse rented private accommodation in a foreign country. You and your spouse maintained your personal effects with family prior to departing Australia. You and your spouse had assets consisting of a bank account for wages and everyday expenditure whilst in a foreign country. You and your spouse have since returned to Australia.

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 and your spouse resided in a foreign country for an extended period before returning to Australia. You and your spouse maintained your personal effects in Australia. You and your spouse returned to Australia before you had intended to. You and your spouse held working holiday visas. Based on the facts above you are residing in Australia according to ordinary concepts. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. 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. 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. Your domicile of origin is Australia. The Commissioner is not satisfied that you have a permanent place of abode outside Australia for the following reasons: • You travelled to a foreign country intending to return to Australia after a number of years • You and your spouse had a working holiday visa • You and your spouse returned to Australia before you had intended to • You and your spouse maintained all of your belongings in Australia Therefore you are a resident under the domicile test. | Detailed Reasoning - Your residency status: Accordingly as you are a resident under the resides and domicile test you are a resident of Australia for taxation purposes under subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.