Private ruling: Residency
Date of advice: 13 July 2018
Published: September 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

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

Relevant facts and circumstances: You were born in Australia. You accepted a job overseas on a two year contract. When you departed Australia you indicated on your departure card you were leaving permanently. You were provided with an employment pass to work overseas and dependent visas for your family. You signed a two year lease on an apartment overseas, joined a gym and signed a two year contract for a mobile phone. You became concerned about the stability of your role overseas as several contractors with the same two year contract as you had been let go. The intention was for you and your family to live overseas long-term, eventually relocating permanently. You sold several belongings in Australia, including furniture and your car and renovated your house to be rented out. After seven months you were informed that your role was non-essential and if there were further budget cuts your position would be the first to go. You and your spouse decided that due to the instability of your employment it would be too disruptive on your children to make the move overseas, therefore they remained in the main residence in Australia. You then returned to Australia permanently.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10(5)(a) | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Detailed Reasoning - Detailed Reasoning: 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 ● 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides (ordinary concepts) 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'. The Commissioner may make reference to the following factors in determining whether a taxpayer is 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. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. In your case, there are various factors that indicate that you were still residing in Australia during the year in question, specifically: ● you were only overseas for 7 months; ● your family remained in your primary residency in Australia; and ● you maintained a place of abode in Australia. Based on the above, you were residing in Australia during the year in question. Therefore, you were a resident of Australia under the resides test of residency for the period of the ruling. | Detailed Reasoning - The domicile and permanent place of abode 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, your domicile of origin is Australia and there is no evidence to suggest that you changed your domicile while you were based overseas. Therefore, your domicile was still Australia during the relevant period. | 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 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. 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. In your case, there are various factors that indicate that you had a permanent place of abode outside Australia during the relevant years: ● you were overseas for 7 months; ● you lived in leased accommodation; ● your family remained in your primary residency in Australia; and ● you maintained a place of abode in Australia. Based on the above, the Commissioner is satisfied you did not have a permanent place of abode outside Australia during the relevant period. Therefore, you were a resident of Australia under the domicile and permanent place of abode test of residency for the period of the ruling. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. You were a resident of Australia under this test as you were present in Australia for more than 183 days during the relevant year, and the Commissioner is not satisfied that your usual place of abode was outside Australia and that you had no intention of residing in Australia. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You were not a resident under this test for the relevant years. | Detailed Reasoning - Conclusion: Your intention was for you and your family to move overseas permanently, due to the instability of your overseas employment this did not occur. Your family remained in Australia during the time you worked overseas, therefore, not breaking your connection with Australia. For the period you were overseas you remained a resident of Australia for tax purposes, therefore, your income from all sources is assessable in Australia.