Private ruling: Residency
Date of advice: 18 July 2016
Published: August 2016
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2011

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: General You are a citizen of a foreign country. You are not a citizen of any other country. Your country of origin is a foreign country. You received a permanent resident's visa via your spouse's application, as you were still living and working in a foreign country. As a permanent resident you have applied twice for Australian citizenship. Your first application was declined as you had not spent sufficient time in Australia to be granted citizenship in your own right. You were notified in a letter that your most recent application was successful and that following a citizenship ceremony you could become a citizen. This was not due to a change in your circumstances but following an application for exemption to residency requirements as you are married to an Australian citizen. You applied for citizenship as you have every intention of living in Australia with your family once the demands of your business have been drawn to an end. You are making every effort to close your business and finally emigrate with your family and personal possessions. The economic climate in a foreign country has prevented you from doing this any earlier. Your intention is to reside in Australia with your family. You have entered Australia many times prior to being granted permanent residence status. Prior to these visits to Australia you also visited Australia for holidays entering on a visitor visa. You spend time in a foreign country every year. You go to a foreign country to live and work. You have never worked in Australia and do not intend to ever working in Australia: You, your spouse and moved to Australia. You had only one address in a foreign country prior to arriving in Australia. You have never been enrolled in any course of study lasting six months or more in Australia. Family and social connection You have a child. You have not developed any professional connections in Australia as you intend to retire as soon as it is financially practical. You have memberships at a couple of clubs in Australia and also play a sport occasionally with some people you have met locally. In a foreign country you are a member of a sports club. You regularly attend local cultural events and have a good circle of friends with which you socialise on a regular basis. Family members live in a property you partly own. Other family members live nearby. In past years you have had a joint holiday with your family in a foreign country. You have retained your membership in a sports club in a foreign country. Accommodation and assets You and your spouse purchased the land for the house and built a house on it. Your assets in a foreign country include: • Your home • A house of which you are part owner • Several additional houses • Net Income from properties • All your work tools • Your furniture • A car and a van • The home you own in a foreign country is solely in your name • You also own investment properties in a foreign country which are also in your name only. • You have club member ships in a foreign country and in Australia. Each time you leave a foreign country to travel to Australia your home is closed. Your car and van are left in the garage. You have houses in a foreign country which you maintain and let as a means of providing an income for your retirement. You have bank accounts and you are in receipt of a retirement pension. Your assets in Australia include: • Your house which is jointly owned with your spouse • A car • Bank accounts. Income and employment The only Australian income you have is bank interest. You consider yourself a resident of a foreign country for taxation purposes, as shown by lodging resident tax returns in a foreign country and paying tax as a resident of a foreign country. You pay tax on all your income (including the interest income from Australia) in a foreign country. You have filed your tax returns in a foreign country as a resident there. You have applied for an Australian tax file number. You have never worked in Australia or had a superfund of any kind in Australia. You intend to spend time every year in a foreign country working. Your spouse works in Australia. You will need to file Australian tax returns to have the 10% withholding deducted.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 • the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 (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. There are several factors outlined above which indicate that you have become a resident of Australia, specifically: • You are a citizen of a foreign country where you were born. However, you have received a permanent resident's visa and you have made a successful application for Australian citizenship. • You applied for citizenship as you have every intention of living in Australia with your family once the demands of your business have been drawn to an end; you currently spend most of your time in Australia. • You spouse is employed in Australia. • Your spouse is an Australian citizen. • You, your spouse and child moved to Australia to live. • You and your spouse purchased land in Australia and built a house on it in which you, your spouse and child reside • You have bank accounts in Australia • You have applied for an Australian tax file number. Based on a consideration of all of the factors outlined above, you will be a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the period of the ruling. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument. | Detailed Reasoning - The domicile and permanent place of abode 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: 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 a foreign country and moved to Australia and will become a citizen of Australia now that you are eligible to do so. Therefore, your domicile of origin was a foreign country and you changed your domicile to Australia. Your domicile will still be Australia while you are working in a foreign country as you have taken legal steps to change your domicile to 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. You have established a permanent place of abode in Australia in a house built, owned and lived in by you and your spouse; together with your child. The Commissioner is satisfied you have a permanent place of abode in Australia where you live with your spouse and child for most of each year. Therefore, you will be a resident of Australia under the 'domicile and permanent place of abode' test of residency for the period of the ruling. | Detailed Reasoning - Your residency status: As you are a resident of Australia under two of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are considered to be an Australian resident for taxation purposes for the period of the ruling.