Private ruling: Residency
Date of advice: 23 December 2016
Published: June 2017
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20YY | Year ended 30 June 20ZZ
Date scheme commenced: 20XX

Ruling: Question and answer | Were you a resident of Australia for taxation purposes for the period you were in Country Y? | Yes.

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You went to Country Y to work in the 20XX income year. You returned to Australia in the 20ZZ income year. You entered Country Y on a Tier 5 Youth mobility visa which was for 2 years. The visa did not allow you to remain permanently in Country Y and this visa could not be extended. You worked for less than 8 different employers while you were in country Y. You rented the one flat for the whole period you were in Country Y. You returned to Australia for 3 weeks while you were in Country Y working. You intended to return to Australia after your visa expired. You do not have any dependants. You are single. You were renting a property in Australia prior to going to Country Y. You stored your belongings with your family when you went to Country Y. You had bank accounts and shares along with a car and personal belongings in Australia. You had two bank accounts in Country Y. You received income from interest and dividends in Australia. You lodged tax returns in Country Y. You did not advise the Australian electoral Commission to have your name removed from the electoral roll. You advised the Commonwealth bank that you would be overseas for approximately 2 years. You are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1) Anti-avoidance rules | The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the low risk PART IVA list as specified in ORCLA.

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' and 'permanent place of abode' test ● the 183 day test; and ● the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. 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'. 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 with Australia compared to the foreign country concerned; and (viii) Maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35): Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms. 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. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. (i) Physical presence in Australia A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home. Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62): Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1. You went to Country Y to work in the 20XX income year. You only made one trip back to Australia during your time in Country Y and this trip was for 3 weeks. You worked for less than 8 employers while you were in Country Y. You rented the same accommodation for the period you were in Country y. Based on the facts above for the period you were in Country Y your behaviour in Country Y reflects a degree of continuity, routine and habit that is consistent with residing in Country Y. You were not a resident under this test for the period you were working in 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 domicile and permanent place of abode test, the 183 day test and the superannuation fund tests. | Detailed Reasoning - Domicile and permanent place of abode: 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: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. 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 you were born in Australia and are a citizen here. Your domicile of origin is in Australia. As your domicile remains in Australia, you will be an Australia resident 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you 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. The expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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. Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia to live overseas ceases to be an Australian resident during the absence. IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode: ● the intended and actual length of stay in the overseas country ● any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country ● the establishment of a home outside Australia ● the abandonment of any residence or place of abode in Australia ● the duration and continuity of presence in the overseas country, and ● the durability of association with a particular place in Australia. As highlighted in paragraph 25 of IT 2650, as a broad rule of thumb, a period of about two years or more would generally be regarded as a substantial period for the purposes of a taxpayer's stay in another country. It must be stressed, however, that the duration of the taxpayer's actual or intended stay out of Australia is not, of itself, conclusive and needs to be considered with all of the factors. The commissioner is not satisfied that for the period you were in Country Y that you set up a permanent place of abode for the following reasons: ● your visa was only for 2 years and could not be extended ● Your visa did not allow you to remain permanently in Country Y ● You intended to return to Australia after your visa expired ● You were in Country Y for approximately 23 months Applying the facts of your situation to the above criteria, you did not have a permanent place of abode in Country Y. | Detailed Reasoning - The 183-day test: Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that: ● their usual place of abode is outside Australia ● they have no intention to take up residence in Australia The term 'usual place of abode' is not the same as 'permanent place of abode'. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country. You were not in Australia for more than 183 days during the period you were in Country Y. You were not a resident under this test. | Detailed Reasoning - The superannuation test: This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age). A person is a resident under this test if they are: ● a member of the superannuation scheme established by deed under the Superannuation Act 1990; or ● an eligible employee for the purposes of the Superannuation Act 1976 ; or ● the spouse, or a child under 16, of a person covered by either of the above. You have not been employed by the Commonwealth government. You do not meet any of the other requirements of this test and you are not a resident under the superannuation test. | Summary: For the period you were working in Country Y you were a resident of Australia for taxation purposes as you are a resident under the domicile test.