Private ruling: Residency
Date of advice: 10 November 2017
Published: March 2018
Ruling period: Year ended 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you a resident of Australia for taxation purposes after your spouse and children relocated to Australia? | A1: No

Relevant facts and circumstances: You are an Australian citizen. You resided in Australia prior to commencing two long term overseas assignments with your employer. Your assignment is to support a critical project – the end date of the project has been extended and the current expectation is that that you will be required to remain in Country X until the project is completed. You hold a multi-entry visa for Country X which can be renewed on an annual basis. You were accompanied by your spouse and children on these assignments. Your family home (primary residence) in Australia was rented out. You are a non-resident of Australia for taxation purposes. You have lodged Australian income tax returns as a non-resident. Your personal circumstances have changed. Your children transferred back to Australia for boarding school. The family’s primary residence in ceased to be rented out. The house was refurnished and has since been used by the children on some weekends and by you and your spouse during your return trips to Australia. During the long school holidays, your children travel to stay with you at the home in Country X. Your spouse commenced employment in Australia at a remote worksite on a fly in fly out arrangement. Under this arrangement they work for a set number of days, followed by a set number of days off. During their “off” periods, their intention was to return to the home in Country X; however, over the past six months this was not possible as they stayed in Australia in order to spend time to look after your parent. Their arrangement was extended at which time they will return to Country X to reside with you until the end of your assignment. You have made the following personal trips to Australia to spend time with your parent who had become very unwell. Your parent passed away and you currently have no travel to Australia planned. You hold managed funds and bank accounts in Australia. You do not hold a bank account or any investments in Country X. You advised the Australian Electoral Office to remove your name from the electoral roll on departure. You do not hold private health insurance in Australia. You do not maintain any social ties (i.e. social club, gym membership, church etc) in Australia. All social interaction beyond your family is undertaken when in Country X. All of your furniture and personal belongings have been shipped to Country X and are situated in your home there. You have a vehicle in Australia. In Country X, you use company provided vehicles. You have advised your financial institutions that you are a non-resident for taxation purposes. You and your spouse are not eligible to contribute to the PSS or the CSS and are not and have not been a Commonwealth Government employee.

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

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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 its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In your case, you have been living with your family in overseas for a period of more than X years and are a non-resident for taxation purposes. As a non-resident, you have broken your association or connection with Australia. Although your family has relocated to Australia and renewed their association and resident status, you remain in Country X to continue working on your assignment. In these situations, the residency status of you and your family are looked at independently from each other. As such, you will still be considered to be residing in Country X until you return to Australia permanently. Therefore, you are not a resident of Australia for taxation purposes under this test. | 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: 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, although you have been working and living in overseas for a period of time, there is no evidence to suggest that you have taken steps to change your domicile. Therefore, your domicile is still Australia. | Detailed Reasoning - Permanent place of abode: 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. In your case, you currently have a permanent place of abode overseas and this will continue to be the case after your family relocated to Australia. Therefore, you are not a resident of Australia for taxation purposes under this test. | 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 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 are not a resident of Australia for taxation purposes under this test as you will not be in Australia for 183 days or more while you are based in Country X. | Detailed Reasoning - Superannuation test: Based on the information you have provided, this test is not relevant in your situation as it only applies to persons eligible to contribute to certain 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. Therefore, you are not a resident for taxation purposes in the relevant financial years.