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

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

Relevant facts and circumstances: You are a citizen of Country A. You operate a successful business in Country A. You became an Australian permanent resident for immigration purposes in 20XX. Due to personal reasons you have been in Australia for two to three months on average from 20XX to 20YY income years. The main reason you were in Australia during the years 20XX to 20YY were for holiday purposes. You are currently on an Australian permanent residence visa with one year validity. You were in Australia for a longer period than normal during the 201Y and 201Z income years due to your divorce that required your presence in Australia. You formally separated from your ex-spouse during 201X, a court order was issued for financial binding agreement during 201Y with the final divorce order issued during 201Z. Based on the terms of the divorce you left all of your joint Australian property assets except for one home in Australia that you stay in when you are in Australia and a small commercial office which is held in a trust that is solely controlled by you. You have transferred most of your joint Country A property assets to your ex-spouse but the balance that you retain is substantial in value. You have retained your business interests in Country A. You actively manage the Country A business while you are in Australia. The residential property you retained in Australia has been used as your main residence while you are in Australia. You have a mortgage over the property with an Australian bank with an offset account, to reduce your interest and support your family and yourself when you are in Australia. You have an Australian bank account, drivers licence and Medicare card in Australia. Almost all of your expenses are paid using your Country A credit card through your Country A bank accounts. You have a child in Australia, who attends an Australian primary school. You have primary custody of your child in accordance with the divorce order. You brought your parents to Australia during 201Y to care for your child. They live in your residential property. Your parents have applied for permanent residence in Australia You maintain private health insurance in Australia for your child and yourself. Your friends, social contacts and business associates are in Country A. You set up a club in 201Y in Country A. You are the Chairman and legal representative of the club. You enrolled in a relevant Program at a Country A university from 20YY to 201Y, presenting your final essay in 201Z. You are expected to graduate in mid 201Z. You are the director of X Australian private companies. You have XX companies in Country A. You are not a member, or a spouse or child of a member, of the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) and | Income Tax Assessment Act 1997 section 6-5.

Reasons for decision: Summary: You are not a resident of Australia for the years ended 30 June 2016 and 30 June 2017 as you do not meet any of the residency tests for those income years. | Detailed Reasoning - Detailed reasoning: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are foreign resident for taxation purposes, your assessable income includes only income 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 an Australian resident for income tax purposes. These tests are: ● The resides test. ● The domicile test. ● The 183 day test. ● The superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650. 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 considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests. | Detailed Reasoning - The resides test: The ordinary meaning of the word reside, according to the dictionary definition, is to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place. Although you have spent some time in Australia, in a house you deem to be your main residence in Australia, you reside according to ordinary concepts in Country A and not in Australia and therefore you do not meet the resides test. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: "Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law ( Henderson v. Henderson [1965] 1 All E.R.179; Udny v. Udny [1869] L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.)) . The common law test of domicile of choice has now been restated in section 10 of the Domicile Act which provides: "The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his home indefinitely in that country." In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1), it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency e.g., the end of his or her employment. On the other hand, if that person has in mind only a vague possibility of returning to Australia, such as making a fortune (a modern example might be winning a football pool) or some sentiment about dying in the land of his or her forebears, such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country - see In the Estate of Fuld (No. 3)(1968) p. 675 per Scarman J at pp. 684-685 and Buswell v. I.R.C (1974) 2 All E.R. 520 at p. 526. Your domicile of origin is Country A, however you have obtained Australian permanent residency. As you have made it clear by your lack of presence in Australia that it is not your intention to make your home indefinitely in Australia, you will maintain your Country A domicile. Therefore as you are not domiciled in Australia you are not a resident under this test. | Detailed Reasoning - The 183 day test: When 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. You do not satisfy this test as you did not spend more than 183 in Australia in either the 201Y or 201Z income years. | 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 are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not treated as a resident under this test.