Private ruling: Residency – individual
Date of advice: 6 July 2018
Published: September 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 from 1 July 2017 to 30 June 2018 ( the 2018 Period )? | A1: No

Relevant facts and circumstances: Citizenship and Permanent Residency 1. You were born in Australia. 2. You have not adopted a domicile of choice. 3. You are an Australian citizen. You are not a citizen of any other country. 4. You have not been granted permanent residency by any other country. 5. Your spouse is not a citizen or permanent resident of Country A. 6. You departed Australia, and entered Country A on xx June 2017. You entered into Country A on a relevant visa that allows you to remain in Country A for more than three years, with the possibility of extension. 7. You have closed all Australian bank accounts and credit cards. 8. You currently own 50% (as joint tenant with your spouse) of a property located in State A Australia (the Australia premises). You permanently resided at the Australia premises prior to your departure from Australia on xx June 2017. When you were in Australia during the 2018 Period, you stayed at the Australia premises. The Australia premises will not be leased while you reside overseas, as your spouse will continue to reside in the premises. Your spouse funds all ongoing costs in maintaining the property including utility costs. 9. Your children are currently enrolled in educational institutions outside Australia. 10. Your spouse currently resides in Australia and has no immediate plans to relocate to Country A with you and will continue to reside in Australia. In the 2018 Period, your spouse visited you in Country A and stayed at your Country A residence, and travelled with you to locations outside Country A and Australia on a number of other occasions. 11. Your parents and siblings reside in Australia. Social and community connections 12. You previously lived in Country A for a few years. 13. You have a number of long-standing friendships with residents of Country A which have been maintained. You have regular dinners and/or lunches as well as attendance at cultural events (theatre, art exhibitions etc) in Country A with these friends. 14. You also have a number of new friends that are based in Country A. 15. You have no immediate family resident in Country A other than your children. 16. You have changed your status with a number of clubs in Australia to overseas member, or have suspended your membership with such clubs in Australia. 17. You have become a member of some social and cultural organisations in Country A. Living Arrangements Overseas 18. During the year ended 30 June 2018, you held a long term lease for a residential property in Country A. You resided in this property for part of the year. You then terminated this lease and entered into a long term lease for a second property in Country A, in which you resided for the remainder of the year. 19. The terms of each of the above leases include household furnishings, although a number of household furnishings from the Australia premises have been moved to the above properties. Travel Movements 20. In the six months prior to the 2018 Period, you spent approximately equal amounts of time both in Australia and visiting your children outside Australia, including in Country A. 21. In the 2018 Period, you have returned to Australia for only brief visits to visit your family and your spouse. During the 2018 Period you have remained in Country A for two thirds of the year. You have also travelled elsewhere in the world on holiday. Other information 22. Neither you nor your spouse is a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976 . 23. You are not on the Australian electoral roll as at xx June 2017. 24. You have advised Medicare that you are a foreign resident and updated your details to that effect around xx November 2017. 25. You have a worldwide private health insurance policy.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 section 104-165

Reasons for decision: Summary: 1. You are not a resident of Australia under the test for residency contained in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the 2018 Period. | Detailed Reasoning - Detailed reasoning: 2. The statutory definition of resident is set out in subsection 6(1) of the ITAA 1936 and, in respect of individuals, states that: resident or resident of Australia means: (a) a person, other than a company, who resides in Australia and includes a person: (i) whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia; (ii) who has actually been in Australia, continuously or intermittently, during more than one‑half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or (iii) who is: (A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or (B) an eligible employee for the purposes of the Superannuation Act 1976; or (C) the spouse, or a child under 16, of a person covered by sub‑subparagraph (A) or (B) 3. The above definition provides four tests for determining whether an individual is a resident for income tax purposes. These are: a) residence according to ordinary concepts; b) the domicile test; c) the 183 day test; and d) the Commonwealth superannuation fund test. 4. The tests that are relevant to your circumstances are tests (a) to (c). 5. You do not satisfy test (d), as neither you nor your spouse have a relevant interest in a Commonwealth superannuation fund. Residence according to ordinary concepts 6. Where a person resides in Australia under ordinary concepts, Australian residency is established and the other tests need not be considered: FCT v Applegate 79 ATC 4307; (1979) 9 ATR 899 ( Applegate ); paragraph 12 of Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia ( TR 98/17 ). 7. As there is no definition of the word ‘reside’ in Australian income tax law, the ordinary meaning of the word must be considered. The Macquarie Dictionary defines ‘reside’ as ‘to dwell permanently or for a considerable time; have one's abode for a time’, and the Shorter Oxford English Dictionary defines it as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place'. 8. Whether a person is a resident of Australia is a question of fact and degree to be determined having regard to the circumstances of the particular case: see FCT v Miller (1946) 73 CLR 93 at 101 (Rich J). Residency is determined by considering all of the evidence and balancing the facts and circumstances and determining if the taxpayer’s behaviour is consistent with the ordinary meaning of ‘resides’. The test is whether the person has retained a ‘continuity of association’ with the place, coupled with an intention to return to that place and an attitude that it remains home: see Hafza v Director-General of Social Security (1985) 6 FCR 444 at 449 (Wilcox J). 9. In Re Iyengar and FCT [2011] AATA 856 ( Iyengar ), Senior Member Walsh identified a number of factors that the courts have taken into account when determining a taxpayer’s residence according to ordinary concepts, namely physical presence; nationality; history of residence and movements; habits and mode of life; frequency, regularity, and duration of visits; purpose of visits to or absences from a country; family and business ties with a country; and maintenance of a place of abode. While not exhaustive, this contains a useful list of factors to consider. | Detailed Reasoning - Conclusion: 10. Balancing the facts and circumstances of your case, you are not a resident of Australia under ordinary concepts for the 2018 Period. 11. Therefore, you will not be considered to be a resident of Australia under this arm of the residency test in subsection 6(1) of the ITAA 1936. Domicile test 12. Subparagraph (a)(i) of the definition of ‘resident of Australia’ includes a person whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia. 13. Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia ( IT 2650 ) sets out the Commissioner’s view on the application of this test. 14. The Commissioner’s view of domicile is contained in paragraphs 8 to 10 of IT 2650. 15. As you were born in Australia, your domicile of origin is Australia until you acquire a domicile of choice in another country: see paragraph 8 of IT 2650. You have not adopted a domicile of choice. Therefore, your domicile is Australia. 16. You will therefore be a resident of Australia under this statutory test unless the Commissioner is satisfied that you have a permanent place of abode outside Australia. | Detailed Reasoning - Permanent place of abode: 17. Paragraph 12 of IT 2650 cites the cases of R v Hammond (1852) 117 ER 1477 at 1488; Levene v IRC (1928) AC 217 and IRC v Lysaght (1928) AC 234 to conclude that: The expression ‘place of abode’ refers to a person's residence, where one lives with one's family and sleeps 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. 18. To fall within this statutory test, the ‘place of abode’ must have the character of being ‘permanent’. The leading case on whether a taxpayer has their permanent place of abode outside Australia is Applegate . In Applegate (79 ATC at 4317; 9 ATR at 910-911), Fisher J provided the following statement on the determination of whether a taxpayer has a permanent place of abode in a particular location: It follows that it is in my view proper to pay greater regard to the nature and quality of the use which a taxpayer makes of a particular place of abode for the purpose of determining whether it qualifies as his permanent place of abode. His intentions with respect to the duration of his residence is just one of the factors which has relevance. Obviously if his stay is purely temporary and he intends to move on or return to Australia at some definite point of time this denies the place of abode an essential characteristic of a home, namely durability. Moreover it seems appropriate to view objectively the nature and quality of the use which the taxpayer makes of the place of abode to determine whether it has the characteristics of his fixed place of abode, his home. It is to my mind perfectly consistent with the establishing of a home in a particular place that the taxpayer is aware that the duration of his enjoyment of the home, although indefinite in length, will be only for a limited period. The knowledge that eventually he will return to the country of his domicile does not in my opinion deny him a capacity to make his home outside of his country of domicile. Such a conclusion is particularly open in the present circumstances where the taxpayer was not a completely free agent in the choice of when to return, it being a matter for negotiation between him and his employers. To my mind the proper construction to place upon the phrase ‘permanent place of abode’ is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place. 19. In Landy and FCT [2016] AATA 754 at paragraphs 21 and 22, Senior Member O’Loughlin summarised the conclusions in Applegate regarding when an abode meets the statutory description of a ‘permanent place of abode’ as follows: [21] To determine whether a place of abode is a permanent place of abode it is necessary to have regard to the nature and quality of the use made of that place, the continuity or otherwise of the [person’s] presence, the duration of [his/her] presence and the durability of [his/her] association with the particular place. Greater weight should be given to these factors than to … a person’s stated intentions. This is an objective analysis. A permanent place of abo[d]e is a fixed and habitual place of abode without needing to be a permanent home. [22] A permanent place of abode outside Australia is not the same as a temporary or transitory place of abode outside Australia. [Citations omitted.] 20. Paragraph 23 of IT 2650 sets out the following factors that the Commissioner considers to be relevant in determining whether a taxpayer has a permanent place of abode outside Australia: (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. | Detailed Reasoning - Consideration of relevant factors regarding permanent place of abode: 21. During the year ended 30 June 2018, you held a long term lease for a residential property in Country A. You resided in this property for part of the year. You then terminated this lease and entered into a long term lease for a second property in Country A, in which you resided for the remainder of the year. 22. The terms of the leases include household furnishings although a number of household furnishings from the Australia premises have been moved to the above properties. | Detailed Reasoning - Conclusion: 23. Based on your facts and circumstances, the Commissioner is satisfied that you had a permanent place of abode outside Australia during the year ended 30 June 2018. 24. Therefore, you will not be considered to be a resident of Australia under this arm of the residency test in subsection 6(1) of the ITAA 1936 for the 2018 Period. The 183 day test 25. During the 2018 Period, you were in Australia for less than 183 days. As you spent less than half the year physically present in Australia, you will not be considered a resident of Australia under the 183 day test for the 2018 Period. Conclusion 26. You will not be considered a resident of Australia for the year ending 30 June 2018.