Private ruling: Residency
Published: January 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2013

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

Relevant facts and circumstances: You were born in country X and are a citizen of country X. You are not a citizen or permanent resident of Australia. You lived and worked in Australia for many years. You entered into an employment contract to work in country Y. You intend to reside in country Y for the duration of the project you are working on which will be for a minimum of a couple of years; however, it could continue for as long as five years. Your employment contract states that your point of hire is Australia and your point of origin is country X. You obtained a visa which allows you to live in country Y for an initial period with the option of renewal. You have no intention of returning to Australia to live in the near future and you may move to another country in the future. You do not have an employment position being held open for you in Australia. You have a spouse and children who were to relocate to country Y with you after the end of the school year. You returned to Australia to help your family relocate. You may return to Australia in the future for family holidays once per annum for a short period of less than 183 days and you may also take holidays in other countries. Your employer has not provided you with accommodation in country Y. You have signed a lease on an apartment in country Y for a term of a couple of years, with options to extend. Your employer has not provided you with an accommodation allowance. The assets you have in country Y comprise of household effects, clothing, sporting equipment and a bank account. You have taken some household effects to country Y and will transport more when your family relocates. You are selling some furniture and your motor vehicle. You were living in your Australian residence for some years prior to your departure. You will rent out your Australian residence. Your Australian assets include your house, a superannuation fund and a 'loan funding' account with a credit balance. You have an Australian mortgage and a credit card. The funds in the loan funding account will be used to meet mortgage payments and associated costs along with the rent received from your house. You will not contribute any of your salary to your Australian superannuation fund. You do not have any social or sporting connections with Australia or country Y. You were not on the Australian electoral role. You have advised the Australian financial institutions you deal with that you are a foreign resident. You have advised Medicare and your private health insurer to have your name removed from their records. On the Australian migration outgoing passenger card, you indicated that you were an Australian resident departing permanently and stated country Y was your place of future residence. Neither you nor your spouse has ever been employed by the Australian Commonwealth government.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-191) | Income Tax Assessment Act 1936 Subsection 6(1) | Domicile Act 1982

Reasons for decision: Summary: 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 (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 Commonwealth superannuation fund 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'. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2013, sixth edition, Macmillan Publishers Group, Australia, 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'. 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: · physical presence in Australia; · nationality; · history of residence and movements; · habits and 'mode of life'; · frequency, regularity and duration of visits to Australia; · purpose of visits to or absences from Australia; · family and business ties with Australia compared to the foreign country concerned; and · 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 - Physical presence in Australia: You left Australia to take up an employment contract in country Y for an expected period of a few years and you currently have no plans to return to Australia to live. You have returned to Australia for a brief period of time to assist your family to relocate with you and only may only return to Australia on an annual basis for a holiday of short duration. Although it is likely you will have very little physical presence in Australia while you are working overseas, this does not preclude you from being an Australian resident as no single factor is necessarily decisive, as mentioned above. | Detailed Reasoning - Nationality: You were born in country X and are a citizen of country X. Although you lived in Australia for many years, you did not become a permanent resident or citizen of Australia. | Detailed Reasoning - History of residence and movements: You were born in country X and lived in Australia for many years. | Detailed Reasoning - Habits and 'mode of life': You and your family are relocating to country Y for an expected period of a couple of years and you: · have established rental accommodation in that country; · rented out your Australian residence; · have sold your vehicle and some furniture; · have taken some household effects with you and are transporting more when your family relocates; · have advised the Australian financial institutions you deal with that you are a foreign resident; and · have advised Medicare and your private health insurer to have your name removed from their records. You have taken actions that are consistent with someone who is leaving Australia for an extended period of time. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: You may only return to Australia for an annual short holiday in the future. | Detailed Reasoning - Family: You, your spouse and children are relocating to country Y so your closest family ties will be in that country. | Detailed Reasoning - Business or economic: You have taken up an employment contract in country Y and will receive rental income from the house you own in Australia. You have an Australian mortgage and a credit card. | Detailed Reasoning - Assets: Your Australian assets include your house property, a superannuation fund and a 'loan funding' account with a credit balance. The assets you have in country Y comprise of household effects, clothing, sporting equipment and a bank account. You have stronger financial ties to Australia than country Y. | Detailed Reasoning - Maintenance of a place of abode: You are renting out your Australian house and will no longer have a residence in Australia. | Detailed Reasoning - Summary of the resides test: Although you have financial ties to Australia, consideration of the factors outlined above shows that you are no longer residing in Australia according to the ordinary meaning of the word. Therefore, you are not a resident of Australia 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. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. Under the Domicile Act 1982 , 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, your country of origin is country X so your domicile of origin is country X. You lived in Australia for many years; however, you did not become a permanent resident or citizen of Australia during this period. Therefore, as you did not take any legal steps which would have proven an intention to change your domicile to Australia, you have retained your country X domicile. Consequently, your domicile is not in Australia and you are not a resident of Australia under this test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. As you will not be physically present in Australia for more than 183 days in any income year while you are overseas, you will not be a resident under this test. | Detailed Reasoning - The superannuation test: An individual is considered to be an Australian resident for income tax purposes if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Only employees of the Commonwealth Government are eligible to contribute to these schemes. You are not a resident under this test as neither you nor your spouse have ever been employed by the Australian Commonwealth Government and are not eligible to contribute to the PSS or the CSS. | Summary: As you are not an Australian resident for income taxation purposes under any of the tests of residency, you are not an Australian resident for taxation purposes from the time you left Australia to take up your employment contract in country Y.