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

Ruling: Questions and Answers | 1. Were you a resident of Australia for tax purposes for the year ended 30 June 2014? | Yes | 2. Are you a resident of Australia for tax purposes after leaving Australia in early 2015? | No

Relevant facts and circumstances: Your country of origin is country X. You moved to Australia with your family and became a citizen of Australia. For approximately a year you worked in country Y and your visa was granted for educational/cultural exchange purposes. You then decided to return to country Y. You now have a visa which enables you to work in country Y in a specific occupation. Your visa is valid initially for two years. You intend to be in country Y for an indefinite period of time. You are working for a company. You are leasing an apartment with another tenant. Prior to leaving Australia you were living at your parent's house. The only assets you have in Australia are a bank account. You do not have any return visits planned to Australia. You are single with no dependants. You have never been a Commonwealth government employee.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | 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. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Year ended 30 June 2014: In your case, you were only overseas in country Y for a short period of 11 months on a temporary exchange program visa. You then returned to Australia. You retained a continuity of association with Australia while you were overseas and will be residing in Australia according to the ordinary meaning of the word. Therefore, you are a resident of Australia under the 'resides' test of residency, it is not necessary to determine whether you meet the requirements of the other three tests of residency for this period. | Detailed Reasoning - Year ending 30 June 2015 and 2016: You moved to country Y for an indefinite period of time. You are working and have rented an apartment and do not have any plans to return to Australia in the foreseeable future. Therefore, you are not a resident of Australia under the resides test from the date you left Australia to move to country Y. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the 183 day test, superannuation fund test and domicile and permanent place of abode tests. | Detailed Reasoning - Domicile and permanent place of abode: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Australia because you are still an Australian citizen. Therefore after leaving Australia in 2015 you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia | Detailed Reasoning - Permanent place of abode: 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 clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Consideration of these factors: • You intend to live in country Y for an indefinite period of time. • The purpose of you moving to the country Y is to live and work there. • You live in rental accommodation in an apartment. • You do not have any assets or property in Australia other than a bank account. The Commissioner is satisfied that you have a permanent place of abode outside of Australia. Therefore, as your domicile is Australia and the Commissioner is satisfied that you have established a permanent place of abode outside of Australia, you are not a resident of Australia under the domicile test of residency. | Detailed Reasoning - 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. As you will not be in Australia for more than 183 days in a financial year after you leave in 2015 this test is not relevant to your circumstances. | Detailed Reasoning - Superannuation fund 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 have never been a Commonwealth Government employee therefore this test does not apply to your circumstances. You are more than 16 years of age. | Detailed Reasoning - Year ended 30 June 2014: As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid overseas. Please refer to our website www.ato.gov.au for further information regarding foreign income tax offset. | Detailed Reasoning - Years ending 30 June 2015 and 2016: As you did not meet any of the above tests for the years ending 30 June 2015 and 2016, you are not a resident of Australia after you leave in 2015. Your assessable income includes only income derived from an Australian source from then. | Detailed Reasoning - Part year tax free threshold: Where a taxpayer either becomes a resident or ceases to be a resident of Australia during a year of income, the period of part-year residency for calculating the pro-rating of the tax-free threshold is determined under section 18 of the Income Tax Rates Act 1986 (Rates Act). Your tax-free threshold will be pro-rated according to your arrival/departure date in/out of Australia.