Private ruling: Residency
Date of advice: 15 September 2016
Published: November 2016
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2016

Ruling: Question and answer | Are you a resident of Australia for taxation purposes prior to your family moving to Country Y? | Yes. | Are you a resident of Australia for taxation purposes after your family moves to Country Y? | No.

Relevant facts and circumstances: You were born in Country Z and you are a citizen of both Country Z and Australia. You went to Country Y in the 2016 income year for work purposes. You have a work contract which is for an indefinite period of time in Country Y. Your spouse and child will join you in 2017. You will rent accommodation in Country Y. Your employer will apply for a work visa for you to work in Country Y which will be for 3 years. Your child will be added to this visa once they arrive in Country Y. Your spouse will only be able to enter Country Y on a 30 day tourist visa as you are not married. Your spouse will be able to remain in Country Y for as long as the visa is extended. You will take all your household and personal items to Country Y. You will rent your home out in Australia. You will keep a bank account open to facilitate the rent. You will remove your name from the electoral roll. You have notified all relevant financial institutions that you are a non-resident. You have left Australia indefinitely. You will return to Australia at the end of 2016 for a few weeks to assist your spouse with packing up the house and getting the house ready for rent. You may return for visits to Australia but will not exceed 183 days in any financial year. Your spouse may return to Australia to visit her family and friends for a few days to a few weeks at a time but will not exceed 183 days in any financial year. You and your spouse are not eligible to contribute to the relevant Commonwealth Government Superannuation funds.

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

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 gained 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. 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. | Detailed Reasoning - The resides (ordinary concepts) test: The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: (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 different countries (viii) Maintenance of place of abode. These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/ 17 Income tax: residency status of individuals entering Australia . It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. Based on the facts above you will be residing in Australia according to ordinary concepts for the period from when you left Australia until your spouse and child join you in Country Y. You will retain a continuity of association with Australia for this period. Once your spouse and child join you in Country Y you will not be a resident of Australia for taxation purposes. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. Your domicile of origin is Country Z and your domicile of choice is Australia. The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. It is the Commissioner's view that an overseas stay in excess of two years may indicate that an individual can be considered to have a permanent place of abode overseas, subject to a consideration of all the other relevant circumstances applying to the taxpayer (paragraphs 23, 25 and 27 of IT 2650). The Commissioner is satisfied that you will set up a permanent place of abode outside Australia from the time your spouse and child join you in Country Y for the following reasons: • Your spouse and child will join you in Country Y • You will rent accommodation in Country Y • You will rent out your family home in Australia • You have a work contract for an indefinite period of time • You have left Australia indefinitely You are not a resident under this 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 will not exceed 183 days in Australia for the period you are in Country Y. You are not a resident under this test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You and your spouse are not eligible to contribute to the relevant Commonwealth super fund. | Detailed Reasoning - Your residency status: For the period from when you left Australia until your spouse and child join you in Country Y you will remain a resident of Australia for taxation purposes. Once your family joins you in Country Y you will no longer be a resident of Australia for taxation purposes.