Private ruling: Residency
Date of advice: 29 May 2017
Published: September 2017
Ruling period: Year ended 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you a resident of Australia for taxation purposes following the relocation of your spouse and children to Australia? | A1: No.

Relevant facts and circumstances: You were born in Australia. You are an Australian citizen. You are employed by a Company in Foreign Country X. You and your spouse departed Australia. Before moving to Foreign Country X, you sold your Australian property and vehicle. You have a valid work visa in Foreign Country X; you are required to renew the visa every two years; your spouse had a dependent visa while in Foreign Country X. Your employer does not provide accommodations. You and your spouse initially stayed at a hotel for a few months. You stayed in your first apartment for a number of years; then you moved to the second apartment for a number of years. You purchased the furniture and a vehicle in Foreign Country X. Both you and your spouse have Foreign Country X Drivers Licenses. Your children were born in Foreign Country X and have Foreign Country X birth certificates; they obtain Australian Citizenship by descent. Both you and your spouse have strong social connections to Foreign Country X. You and your family intended to reside in overseas permanently. Your child was incorrectly diagnosed and unnecessarily medicated with medication. The incorrect diagnosis was confirmed by an Australian Hospital. You purchased a property in Australia for investment purposes initially; however, you decided to let your spouse and children relocate to Australia to obtain better health care. Your plan is to continue working for the Company in Foreign Country X for at least the next three years to complete your involvement in the Company project. You moved into a furnished serviced apartment in Foreign Country X, the apartment is for your personal use only. You maintain a joint bank account in Australia which is used for receiving your salary and wages. You do not have any social or sporting connections with Australia. You have advised your financial institutions that you are a non-resident for taxation purposes. You have cancelled your private health insurance in Australia. You are not on the Australian electoral roll. You lodge income tax returns and pay tax in Foreign Country X. You have lodged Australian income tax returns as a non-resident for the last several years. Neither you nor your spouse is an employee of the Australian commonwealth government.

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

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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 (and permanent place of abode) 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. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In your case, you have been living with your family in Foreign Country X for a number of years and are a non-resident for tax purposes. As a non-resident, you have broken your association or connection with Australia. Although your family has relocated to Australia and renewed their association and resident status, you remain in Foreign Country X. In these situations, the residency status of you and your family are looked at independently from each other. As such, you will still be considered to be residing in Foreign Country X until you return to Australia permanently. Therefore, you are not a resident of Australia for taxation purposes 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: 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. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case, although you have relocated to Foreign Country X for a period of time, there is no evidence to suggest that you have taken steps to change your domicile. Therefore, your domicile is still Australia. | Detailed Reasoning - Permanent place of abode: A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. In your case, you currently have a permanent place of abode overseas and this will continue to be the case after your family relocated to Australia. Therefore, you are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You are not a resident of Australia for taxation purposes under this test as you will not be in Australia for 183 days or more while you are based in Foreign Country X. | Detailed Reasoning - Superannuation test: Based on the information you have provided, this test is not relevant in your situation as it only applies to persons eligible to contribute to certain superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Therefore, you are not a resident for taxation purposes in the relevant financial years.