Private ruling: Residency
Date of advice: 12 July 2018
Published: September 2018
Ruling period: Year ending June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Am I an Australian resident for tax purposes? | A1: No

Relevant facts and circumstances: You were born in Australia. You are an Australian citizen. You do not hold any other citizenship. You have not been granted permanent residency in any other country. You work for an international organisation. You are currently living and working in overseas. You are there currently on a work visa. You are currently engaged in a work contract which started in January 20XX. The contract ends in January 20XX. Before starting your current contract you had been engaged in numerous work contracts in various countries around the world. Before your first contract you were living on a permanent basis in an apartment you own in Australia. You rent the apartment to an unrelated party. Your parent has a house in Australia. All your belongings have been kept at your parent’s house. Every time you return to Australia you stay at your parent’s house. Your initial contract was a 3 month consultancy stint overseas starting in August 20XX. That contract was extended to 11 months after which you returned to Australia in July 20XX. You were then offered another consultancy contract based in the same overseas country, which you left Australia for in September 20XX. This contract ran for 11 months. You were then offered a 4-month consultancy contract with your current employer in a new country. You left Australia in December 20XX for this contract. Your contract was renewed every year until December 20XX. You were then offered a 2 year contract extension with your current employer through to January 20XX. You would spend one month in Australia on holiday every year and would stay at your parent’s home. During your stays in your new city, your living situation varied. For 10 months starting from December 20XX you rented an apartment on a month-to-month basis via Airbnb. You then entered into a 1 year lease from October 20XX on a studio apartment with yourself as the sole occupant. You then took out a 3 year lease on a larger apartment in which you currently reside from December 20XX. You do not own any real property overseas. You still receive rental income for your Australian property. You got married overseas. Both you and your spouse plan to return to Australia at the completion of your current contract, though no action has been taken to put this plan into action. You maintain strong family and friend ties with Australia. This is expressed through a group of them attending your overseas wedding. You have not advised the Australian Electoral Office to remove your name from their records. You have not advised Medicare to remove your name from their records. You also hold Australian superannuation accounts. You have not lodged any tax returns in any other country besides Australia. Under the guidance of your accountant you lodged your 20XX-20XX tax return as a non-resident. You hold an Australian bank account. You have a mortgage on your Australian apartment. When completing your Australian Immigration Outgoing passenger card you stated ‘work/business’ as the reason for your going overseas.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6 (1) | Income Tax Assessment Act 1997 subsection 995-1(1) | Income Tax Assessment Act 1997 section 6-5

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income derived from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. This includes employment income, rental income, Australian pensions and annuities and capital gains on Australian assets. 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: ● resides test ● domicile and permanent place of abode test ● 183 day test and ● Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside 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. You only need to satisfy one of the four tests to be considered a resident of Australia for tax-purposes. | Detailed Reasoning - The resides (ordinary concepts) test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3rd 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 your case as you do not reside in Australia under ‘ordinary concepts’ you do not satisfy the resides test. This is because you live in Country X with your husband for majority of the year. As you do not meet the resides test we have to apply the three statutory tests. | Detailed Reasoning - The domicile test: The first test is the domicile test. Generally a person’s domicile is a place that is: ● considered by law to be your permanent home ● usually something more than a residence. You may have no fixed place of abode but under the law you will always have a domicile. You can only have one domicile at the one time, whereas you may be resident in two or more places. There are three basic types of domicile, as established by common law and statutes: ● Domicile by origin, which is attributed to everyone at birth. For example, a nuptial child adopts the domicile of its father, an ex-nuptial child that of its mother. ● Domicile by choice, which will be inferred by law, if there is both a change of residence and an intention of making the change permanently or at least indefinitely. Any person without a legal disability can have a domicile of choice. ● Domicile by operation of law. For example: ● an infant's domicile is that of its parents and changes when the parent's domicile changes ● a married woman can acquire her own domicile, independent of her husband ● the age of capacity to have an independent domicile is fixed at n 18 years, or n when the person marries. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home permanently in that country e.g., through having obtained a migration visa. Permanent does not mean forever or everlasting but connotes a more enduring relationship with the particular place of abode and an intention to return to Australia in the foreseeable future to live does not prevent someone from setting up a permanent place of abode. You initially moved to your current location on December 20XX and rented month to month accommodation, and eventually took a one year lease on an apartment on October 20XX. You then took a three year lease on an apartment in December 20XX. During this time you worked on yearlong contracts until you accepted a two contract that started on January 20XX. You married in 20XX to a foreign national living in Country X, and you had intended to stay in Country X long term as evidenced by your lease. You have expressed an intention to move back to Australia in 20XX and you still have strong connections with family and friends in Australia. You have not informed any Australian authorities that you had intended to leave the country permanently but you did rent out your Sydney apartment for a number of years. Based on these facts your domicile is considered to have been changed through choice to your Country X apartment meaning you are considered a non-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 does not intend to take up residence in Australia. You do not satisfy this test as you are based in Country X for 11 months (330 days) of the year. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is: n a member of the superannuation scheme established by a deed under the Superannuation Act 1990; or n an eligible employee for the purposes of the Superannuation Act 1976; or n The spouse or a child under 16, of a person covered by the above. You do not satisfy this test as you are not a contributing member to a relevant superannuation fund. | Detailed Reasoning - Your residency status: You are deemed a non-resident for tax purposes for the income period 20XX-20XX as you do not satisfy the Resides test or any of the three statutory tests.