Private ruling: Residency
Date of advice: 16 February 2017
Published: July 2017
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20YY | Year ending 30 June 20ZZ
Date scheme commenced: 1 July 20WW

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

Relevant facts and circumstances: You were born in foreign country X. You are a citizen of foreign country X. You commenced living in Australia. You became an Australian citizen. You relocated to foreign country X. Your spouse travels and accompanies you all the time. You and your spouse do not require a visa to stay in foreign country X as both of you are citizens of that country. You stay with your family while in foreign country X. You were renting in Australia prior to your departure. Your adult children are living in Australia. You made the same visits to Australia since you departed for foreign country X: The purposes of your visits were for various mile stone events. You do not hold any investments or assets in Australia. You do not have any loans or credit cards in Australia. You closed all your Australian bank accounts. You have not received any Australian source income since 1 July 20WW. Your assets overseas are held by your family trust and you receive distributions from your overseas family trust. You maintain your personal overseas bank accounts. You lodged your Australian income tax return for the 20XX FY as a non-resident. You do not have any social or sporting connections with Australia. You are a member of business and social groups in foreign country X. You have not advised the Australian Electoral Office to have your name removed from the electoral roll. You have cancelled your private health insurance in Australia. You have advised Medicare to have your name removed from their records. You and your spouse have never been Commonwealth Government of Australia employees for superannuation purposes.

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 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 do not reside in Australia according to the ordinary meaning of the word; therefore, you are not a resident of Australia for income tax purposes. | 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. In your case, you moved to Australia and subsequently changed your domicile to Australia. You are a citizen of foreign country X and Australia therefore can choose to reside in either country indefinitely. You moved back to foreign country X and have stayed with your family in foreign country X. While you have returned to Australia several times since then, these visits have only been for short periods. You resumed your foreign country X domicile. Therefore, you are not a resident of Australia for income tax purposes under the domicile 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. In your case, you have not spent 183 days or more in Australia during the relevant years. Therefore, you are not a resident of Australia for income tax purposes under this test. | Detailed Reasoning - Superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse currently contribute to certain superannuation funds for Commonwealth government employees. You are not a resident of Australia for income tax purposes under this test as neither you nor your spouse have been employed by the Australian Commonwealth government. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you do not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Therefore, you are not a resident for income tax purposes in the relevant financial years.