Private ruling: Residency for taxation purposes
Date of advice: 3 September 2015
Published: September 2015
Ruling period: 1 July 2014 to 30 June 2017.
Date scheme commenced: 20 August 2014.

Ruling: Question and answer: | Are you a resident of Australia for taxation purposes while you are living and working in another country? | No.

Relevant facts and circumstances: You are an Australian citizen. You are not a citizen of any other country. You are single. You have not been granted permanent residency by any country outside of Australia. Prior to leaving Australia you lived in rental accommodation and with relatives. You left Australia and travelled to another country to work. You will work in the other country for more than two years before returning to Australia to live. You were a resident of Australia for taxation purposes prior to leaving to go to the other country. Your visa allows you to stay in the other country for up to five years. You have not returned to Australia since you left to go to the other country and will not return to Australia during the remainder of the period you will live in the other country. You are renting an apartment in the other country. You have purchased a car in the other country and you have opened a bank account there. You have investment properties and bank accounts in Australia. You receive rental income from Australia. You have sold your Australian household effects. You have friends in Australia. You have made friends in the other country and attend a Church there. You do not have any sporting connections in Australia or the other country. You are not a Commonwealth government of Australia employee for superannuation purposes. You had your name removed from the Australian Electoral Roll before leaving to go to the other country. You are using a relative's address in Australia as a mailing address. You have suspended your Australian private health insurance. You have lodged a tax return in the other country. When you left Australia you stated you were going to the other country for work purposes when you completed your Australian Immigration Outgoing Passenger Card.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1(1). | Income Tax Assessment Act 1936 Section 6(1).

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation 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 it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, you have not resided in Australia according to the ordinary meaning of the word since leaving for the other country and you will not be residing here according to the ordinary meaning of the word until you return from the other country. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. You obtained an Australian domicile when you became an Australian citizen and your citizenship of a different country was renounced. Accordingly, you will be a resident under this test unless the Commissioner is satisfied you have a permanent place of abode in the US while you are living and working there. Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia specifies that a 'permanent place of abode' does not have to be everlasting or forever and does not mean an abode in which a person intends to live for the rest of their lives. In essence, Taxation Ruling IT 2650, specifies that a person's place of abode is where they live and is a question of fact to be determined in the light of all the factors a particular case Based on the facts you have provided, the Commissioner is satisfied you established a permanent place of abode in the other country when you moved there and you will have a permanent place of abode in the other country until you return to Australia. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. Based on the facts you have provided, this test will not operate to make you a resident of Australia during the period you are living and working in the other country. | Detailed Reasoning - The superannuation test: Based on the facts you have provided, the Commonwealth superannuation test does not apply to you. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you will not satisfy any of the tests of residency for taxation purposes during the period you are living and working in the other country and you will not be a resident of Australia for taxation purposes during that period.