Private ruling: Residency
Published: August 2014
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Are you a resident of Australia for income tax purposes? | No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Your country of origin is Australia and you are an Australian citizen. You left Australia upon accepting a job offer in foreign country A. Your family (spouse and a child) followed you. When you arrived in foreign country A, you initially entered with a temporary visa which was then converted to a residency permit about four weeks from your arrival. This is the normal procedure. You have supplied a copy of your residency permit. The permit is renewed on an annual basis and allows you to live there permanently. You are employed by a company in foreign country A. You are on an open ended contract renewed annually as per the labour law in foreign country A. The decision to relocate and make your home indefinitely outside Australia was made prior to your departure, when you were offered the job. Before your departure, you organised to sell your residential dwelling. All your household items were donated to various charities or given away to former neighbours at this time. You do not have a return airline ticket. You intend to visit Australia for holidays with your family once a year and you stay for less than 183 days. You own assets in foreign country A: • a motor vehicle • bank accounts • personal belonging • household goods (furniture, white goods, etc.) You, your spouse and child live in a fully furnished accommodation which is provided by your employer. Your only asset in Australia is your investment property. The only income you receive from Australia is from your investment property. You do not have a position being held for you in Australia. You have no social or sporting connections with Australia apart from keeping in touch with family members, friends or former colleagues. You have developed a large social and professorial network in foreign country A, with both the locals as well as with expatriates with whom we meet on regular outings. You have advised the Electoral Commission to have your name removed from the electoral roll prior to your departure from Australia, both state and federal. You have advised you bank of your overseas address. Prior to leaving Australia, you cancelled your: • car insurance • house and contents insurances • life insurance and • private health insurance. You have notified Medicare that you were moving overseas. You do not lodge tax returns in any other country. You will lodge a tax return in Australia for a financial year due to the income received from your investment property. When completing the Australian immigration Outgoing passenger card you stated that you were relocating or leaving Australia for employment. Neither you nor your spouse is a Commonwealth Government of Australia employee.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Summary: An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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. These tests are: • the resides test, • the domicile test, • the 183 day test, and • 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other 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 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 Australia and the other country; and (viii) maintenance of a 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. In your case, you left Australia to live and work in foreign country A. You have an employment contract which is renewed annually. The decision to relocate and make your home indefinitely outside Australia was made prior to your departure, when you were offered the job You will return to Australia each year for less than 183 days at a time to visit your family and friends. | Detailed Reasoning - (ii) Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. Your country of origin is Australia and you are an Australian citizen. | Detailed Reasoning - (iii) History of residence and movements: You left Australia to live and work in foreign country A. You return to Australia once a year for less than 183 days. | 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 have lived and worked outside Australia for several years. Your spouse and child joined you. You have an employment contract which is renewed annually. You have sold your home in Australia. You formed an intention to live permanently outside Australia prior to your departure, when you were offered the job. You return to Australia each year for less than 183 days to visit family and friends. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia. In your case, you intend to return to Australia each year for less than 183 days. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: The purpose of your absence from Australia is to live and work in foreign country A with your family and your return visits to Australia will be to visit family and friends. | Detailed Reasoning - (vii) Family and business ties: Case law has shown that an individual is more likely to be considered to be residing in Australia where the spouse and any dependent children of the individual continue to reside in Australia during his or her absence overseas. | Detailed Reasoning - Family: In your case, your spouse and child joined you in foreign country A, a few months after your arrival there. | Detailed Reasoning - Business or economic: As mentioned above, you have taken up an employment contract in foreign country A. You have sold your family home in Australian. You have an investment property in Australia. | Detailed Reasoning - Assets: In Australia: • an investment property • a bank account In foreign country A: • a motor vehicle • bank accounts • personal belonging • household goods (furniture, white goods, etc.) | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: Case law has shown that an individual is more likely to be considered to be residing in Australia where a place of residence remains available for the individual and/or family members to live in. Conversely, this may be less likely if the residence is sold or rented to tenants. In your case, your spouse and child have joined you in foreign country A. You have sold your Australian home and disposed of household furnishings. Accordingly, you are not maintaining a place of abode in Australia. This will be a strong indication of your continuing association with foreign country A during your absence. | Summary: As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning. You left Australia to live and work indefinitely in foreign country A. Your spouse and child joined you a few months later. You have sold your home and disposed of your household goods. You only return to Australia for less than 183 days a year to visit family and friends. You, your spouse and child have no plans to return to Australia to live. Based on the above, you have not retained a continuity of association with Australia while you have been living and working overseas and you will not be residing in Australia according to the ordinary meaning of the word. Therefore, you are not a resident of Australia under the 'resides' test of residency. | Detailed Reasoning - The domicile 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: Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Australia because your country of origin is Australia and you are still an Australian citizen. Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia. | Detailed Reasoning - Permanent place of abode: 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. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (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. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. It is considered that your permanent place of abode is in foreign country A because: • you started a permanent work contract • your spouse and child are living with you in foreign country A • you only intend to return to Australia for less than 183 days in an income year • you live in a dwelling in foreign country A which is provided by your employer • your house in Australia has been sold • you have no intention to return to Australia to live. You are not a resident under the domicile test. | Detailed Reasoning - The 183 day test: 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 nodes not intend to take up residence in Australia. You intend to visit Australia for holidays with your family once a year. You intend to stay for less than 183 days. As you will not be present in Australia for more than one-half of the income year you will not be a resident under the 183 day test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident of Australia if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) of the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. Neither you nor your spouse has ever been a Commonwealth Government of Australia employee. As you do not meet the above conditions you are not a resident under this test. | Detailed Reasoning - Conclusion: As you do not meet any of the above tests, you are not a resident of Australia for tax purposes. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997 , your assessable income only includes income gained from sources in Australia.