Private ruling: Residency
Published: November 2014
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: No

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You have been living in country X for the past year. You have now decided to make country X your home and live there permanently. You are not married. You have a dependant over 15 years old child who lives with you in country X. Your child attends school via on-line distance education. You have a three year renewable visa which also covers your child. The visa does not allow you to live permanently in country X. However as you intend to live in country X for an indefinite period you would revert to another visa which allows renewals for an indefinite period. You are a director of X Australian companies. You are paid a salary by the Australian company for the services you perform in Australia. Your overseas company charges a fee to the Australian company for services it provides to the Australian company. The overseas company employs a number of employees to undertake research and assist in servicing the Australian Company. You own a dwelling in Australia which was your main residence when you lived in Australia. Your parents now live in the dwelling and maintain it for you in lieu of rent. Part of the dwelling is used as an office to run the Australian company and the company pays you rent for use of the property. You spend approximately 50 days in Australia of which 10 days are spent working in the office located at your dwelling. You stay in hotel type accommodation when you work in Australia as the work requires you to travel to different destinations within Australia. When you return to Australia your child does not travel with you. You and your child live in a rental apartment which you have leased for two years. You intend to renew the lease or purchase an apartment. Your assets in Australia include: • two investment properties • bank account • superannuation Your assets in country X include: • Shares • Bank account • Furniture and household effects purchased in country X You have a fixed term deposit in Australia which is due to expire and you will transfer the balance to your overseas bank account. You maintain your private Australian health insurance for the purpose of having access to appropriate health cover for your child when you are in Australia. You will advise the Australian Electoral Office to have your name removed from the electoral roll. Your Australian bank will be advised you are a non-resident. You do not have any sporting or social connections in Australia. In country X, you are a member of a local sporting club. You have never been a Commonwealth Government of Australia employee.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Detailed Reasoning - Residency: 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | Detailed Reasoning - The resides (ordinary concepts) 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. 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.' In considering the definition of 'reside', the court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, it was stated that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home. You left Australia and moved to country X with your dependant child. You have been living there for the past 12 months and decided from 1 July 20XX you would make it your permanent home. You will return to Australia for approximately 50 days a year. | Detailed Reasoning - (ii) Nationality: Your country of origin is Australia and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence: You lived and worked in Australia prior to moving to country X. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. • You are living and working in country X. • You have established a company in country X. • You will stay in country X for as long as your company is in existence. • Your dependant child is living in country X with you. • You live in a private rental property on a two year lease and may purchase an apartment. • You have joined a local sporting club. • You have established assets in country X. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You intend to return to Australia for 50 days each year. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You moved to country X to run your company which is based there. You return to Australia for work purposes as your overseas company is affiliated with an Australian company. | Detailed Reasoning - Family: Your parents live in Australia in a house owned by you. Your child lives with you in country X. | Detailed Reasoning - Business or economic: Your assets in Australia include: • house • two investment properties • bank account • superannuation Your assets in country X include: • Shares • Bank account • Furniture and household effects purchased in country X | Detailed Reasoning - (viii) Maintenance of Place of abode: You are living in a rental property in country X which is furnished with your household effects and furniture. | Detailed Reasoning - Summary - resides test: You will not be residing in Australia due to the following factors: • you are living in country X and have been living and working there for a year and intend to be there for an indefinite period of time • you are living in rental accommodation in country X on two year lease • your company is well established in country X In consideration of the factors outlined above, you will not be residing in Australia according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test. | Detailed Reasoning - Domicile and permanent place of abode: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode 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. Your domicile is Australia because your country of origin is Australia and you are an Australian citizen. Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | 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. 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. 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; iii. 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; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. 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. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Consideration of these factors: • You intend to live in country X for an indefinite period. • The purpose of you moving to country X was to run your company which is well established there. • You live with your child in rental accommodation in country X. • Your house in Australia is used partly for office space and your parents now live there. • When you return to Australia you travel extensively and stay in paid accommodation. The Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - 183 day: Where 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. As you will not be in Australia for more than one-half of the relevant income years this test is not relevant to your circumstances. | Detailed Reasoning - Superannuation fund test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You have never been a Commonwealth Government employee therefore this test does not apply to your circumstances. You are more than 16 years of age. | Detailed Reasoning - Conclusion - your residency status: As you do not meet any of the above tests, you are not a resident of Australia.