Private ruling: Residency
Published: April 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Question and answer | Are you residents of Australia for tax purposes? | Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: · the resides test, · the domicile test, · the 183 day test, and · the superannuation test. 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: · whether the person is physically present in that country at some time during the year of income · the history of the person's residence and movements · if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits · if the person is outside the country for part of the relevant income year, the purpose of the absences · the family and business ties which the person has with the particular country, and · whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. In your case, you had both been living in Country X for a number of years. Even though you had returned to Australia with the intention to stay, you were physically only present here for less than 60 days until you left again to attend a training facility in Country Y. Although you own a house in Australia, this has been rented out and was therefore not available for your use. It cannot be said that you were residing in Australia in the relevant year. Therefore, you are not residents of Australia under this 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. Your domicile is Australia because you were born in Australia and you are an Australian citizen. You have taken no steps to change your domicile to Country X, or to any other country. | Detailed Reasoning - Permanent place of abode: 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 courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. 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 taxpayer's stay in the overseas country; (b) 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; (c) 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; (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 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. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. In your case, the Commissioner is not satisfied that you have a permanent place of abode outside Australia for the following reasons: · You do not intend to live in Country X or Country Y permanently · You have not established a home in Country X or Country Y, you have been provided temporary accommodation by your employer · You do not have your own belongings such as furniture in the house, you are using belongings that are provided by your employer · You still have a close association with Australia as your friends and family live here and you intend to return to Australia at some time in the near future As you are residents under the domicile test, there is no need to consider the other two statutory residency tests. | Detailed Reasoning - Conclusion: As you meet the domicile test, you are residents of Australia. As you are residents of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.

Relevant facts: You were both born in Australia and lived in Australia until you went to Country X to work as volunteers. | You stayed in Country X for a number of years. | You moved back to Australia with the intention to stay in Australia. | You own a house in Australia and this was rented out privately during your time away in Country X. | You had a business in Australia which you sold when you returned. | When you returned to Australia you both lived with family members until you worked out what you were doing. | Shortly after returning to Australia, you were asked to attend a training facility for your volunteer duties in Country Y. | You both travelled to Country Y and lived at the training facility accommodation. | You then returned to Australia. | You both accepted a new assignment in Country X and returned to Country X. | You both have work visas for Country Y for your activities. | In Country X you are living at accommodation premises provided by the volunteer organisation. You have sole use of the apartment for most of the time you are staying there. When you travel away for various volunteer duties, the apartment is available for others to live in. | You have basic personal belongings such as a television and DVD player. All other furniture is provided by the volunteer organisation. | You are about to move into a communal facility where housing facilities are for communal use. | You may stay in Country X for a number of years. | You have no assets overseas. | Your Australian assets include the house you are renting out and a bank account with minimal savings. | You remain on the Australian electoral roll and have not advised Medicare or other organisations to have your names removed from their records. | Neither of you have ever been Commonwealth government employees.