Private ruling: Residency
Published: May 2013
Ruling period: Year ended 30 June 2009 | Year ended 30 June 2010
Date scheme commenced: 1 July 2008

Ruling: Questions and answers | 1. Were you a resident of Australia for tax purposes while you were in Country X and had an intention to stay there (period 1)? | No. | 2. Were you a resident of Australia after you made the decision to come back to Australia permanently (period 2)? | Yes.

Relevant facts and circumstances: You are an Australian citizen but were born in Country Y. You left Australia for Country X with your spouse and children in the 200X income year, intending to stay for a number of years. You found long-term tenants for your Australian home. You had other Australian rental properties. You declared yourself to be a non-resident for tax purposes on your departure. You started employment in Country X with a company under a number of years renewable contract. You initially lived in a property in Country X and then moved to a rented house in late 200X. Whilst staying in Country X you visited Australia a number of times on holiday breaks for a total of Y days. In the relevant income year, your spouse and children returned to Australia for medical reasons. You were unable to negotiate a contract with your employer to include adequate care for your spouse and 2 months before you left Country X you decided that you would return to Australia. You returned to Australia in the subsequent income year after completing the minimum requirements of your contract. Neither you, nor your spouse, have ever been Commonwealth government employees.

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 (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 superannuation 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 considered to 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 , 2001, rev. 3 rd 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: · whether the person is physically present in that country at some time during the year of income · the history of the person's residence and movements · if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits · if the person is outside the country for part of the relevant income year, the purpose of the absences · the family and business ties which the person has with the particular country, and · whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. | Detailed Reasoning - Period 1: In your case, you left Australia to live and work in Country X. You left with the intention of staying there indefinitely and made it your usual abode for the time you were there. Therefore, you were not residing in Australia according to the ordinary meaning of the word, and as such you were not a resident of Australia under this test during this period. | Detailed Reasoning - Period 2: In the subsequent income year, your intention changed and you decided to return to Australia permanently. You were residing in Australia according to the ordinary meaning of the word from the time your intention changed, as your spouse and relations were living in your home in Australia, and you intended to join them at the completion of your employment contract. As you were residing in Australia according to the ordinary meaning of the word, you were a resident under this test for this period. As you were a resident under the resides test for this period, the remaining tests of residency do not need to be considered. | 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. | 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 an Australian citizen, and although your country of origin is Country Y, you moved from there to Australia permanently and have made Australia your new domicile. | Detailed Reasoning - Permanent place of abode: 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. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) 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; (c) 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; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayer's presence in the overseas country; and (f) the 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. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. In your case the Commissioner is satisfied that you established a permanent place of abode in Country X. This is because: · You moved to Country X to stay there indefinitely as you had a three year renewable contract with a company. · Your family, spouse and children, accompanied you to Country X. · When first arriving in Country X you lived in a property before moving into a rented home. Though you moved house, it was within the city of your work and based around your employment and life in the city. · You had long term tenants for your home in Australia | Detailed Reasoning - Period 1: In your case, although your domicile is Australia, the Commissioner is satisfied that you set up a permanent place of abode outside of Australia. Therefore you were a not a resident of Australia under this test from your arrival in Country X until it was no longer your intention to remain in Country X. | 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. | Detailed Reasoning - Period 1: You were not physically present in Australia for more than 183 days during this period. Therefore, you are not a resident of Australia under this test. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds: · established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or · established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or · the spouse or child under 16 of a person covered by either of the above funds. As neither you, nor your spouse, have ever been Commonwealth government employees, this test is not applicable to you. | Detailed Reasoning - Period 1: As you do not meet any of the above tests for this period, you are not a resident of Australia for tax purposes for this period. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia. | Detailed Reasoning - Period 2: As you are a resident of Australia under the resides test for this period, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.