Private ruling: Residency for taxation purposes
Published: December 2014
Ruling period: 1 July 2012 to 30 June 2013.
Date scheme commenced: 1 July 2012.

Ruling: Question and answer: | Were you a resident of Australia for taxation purposes in the financial year ended | 30 June 2013? | No.

Relevant facts and circumstances: In the financial year ended 30 June 20XX you did not have an Australian domicile. You were a resident of another country from 19YY to 20XX where you had your permanent and usual place of abode and operated a business. One of your children resided in the other country with you. You purchased a property in Australia in 20ZZ but had had no intention of residing in Australia at that time. You later applied for and were granted a permanent residence visa for Australia. When you applied for your permanent residence visa you still had no immediate intention of residing in Australia but had contemplated moving to Australia after the completion of your child's education in the other country. For it to remain valid, the terms of your permanent residence visa required you to take up residency in Australia by a certain date. You daughter completed her schooling in the other country. You came to, and took up permanent residence in Australia in the financial year ended 30 June 2014. In the financial year ended 30 June 20XX you made five trips to Australia to check on the state of your property and spent more than 183 days in Australia.

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

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax 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 it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, the Commissioner accepts that you were not residing in Australia according to the ordinary meaning of the word in the financial year ended 30 June 2013. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. You were not a resident of Australia under this test in the financial year ended 30 June 2013 because: • you did not have an Australian domicile and your permanent place of abode was in another country, and • you did not become a permanent resident of Australia (thereby acquiring a new domicile in Australia) until the financial year ended 30 June 2014. | 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 considered 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 were in Australia for more than 183 days in the financial year ended 30 June 2013 however, your usual place of abode during that period was in another country and you have stated you had no intention of residing permanently in Australia before your child completed school in the other country. As a result, and based on the facts you have provided, you were not a resident of Australia for taxation purposes under this test for the financial year ended 30 June 2013. | Detailed Reasoning - Superannuation test: Based on the facts you have provided this test is not relevant in your situation as it only applies to persons eligible to contribute to the 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 between the period 1 July 2012 to 30 June 2013. Accordingly, you were not a resident of Australia for taxation purposes during that time.