Private ruling: Residency Status
Published: February 2014
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: The scheme has commenced.

Ruling: Q1: Does the taxpayer reside in Australia within the ordinary meaning of the word for the purpose of the definition of resident in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No, the taxpayer does not reside in Australia within the ordinary meaning of the word for the purpose of the definition of resident in subsection 6(1) ITAA 1936.

Relevant facts and circumstances: • The taxpayer was born in country Z in 19XX and is a citizen of that country. • In 19XX, the taxpayer moved to country Y where they worked for the next 2X years until 19XX. • The taxpayer met their spouse, a country Y citizen, in country Y and they married there in January 19XX. • They also worked in Australia for five years between 19XX and 19. • Upon retirement, the taxpayer returned home to live with their spouse in country Y and they continue to reside there now. • The taxpayer speaks fluently the language of country Y. • Their spouse and children are citizens of country Y. • The taxpayer has also converted to the predominant religion of country Y. • The taxpayer was granted permanent residency in country Y in the late 19XXs. • As the taxpayer was not born in country Y, they cannot become a citizen of country Y. • Their domicile is in country Y. • The taxpayer's spouse owns two properties in country Y, as well as a vacant block of land. • The first property has been the family home since 19XX. • The second property is an apartment, also used by the family. • All valuables and sentimental items, including family photos, are stored in the family home in country Y. • The taxpayer and their spouse were given permanent residency in Australia in 19XX. • During their time working in Australia, the taxpayer applied for Australian citizenship in order to simplify their frequent arrivals and departures at Australian airports during their frequent overseas business trips. • The taxpayer was granted Australian citizenship in 19XX. • The taxpayer's spouse has not applied for Australian citizenship. • In 19XX, the taxpayer purchased a property in Australia. • Since their return to country Y in 19XX to live with their spouse, this property now serves as a holiday home for the family. • The taxpayer and their spouse stay there when they visit their child who lives and works in Australia. • This property contains only the basic necessities. • The taxpayer has a bank account in their own name in country Y and a bank account held jointly with their spouse in Australia. • The taxpayer and their spouse own a car in country Y. • They have no car in Australia. • The taxpayer has an extended family of over X individuals in country Y. • The taxpayer does not have an extensive social network in Australia and has no family in Australia apart from their child. • The taxpayer and their spouse also belong to various clubs in country Y. The taxpayer belongs to no clubs in Australia. • The taxpayer also supports various charities in country Y and none in Australia. • The taxpayer's doctor is in country Y. • The taxpayer does not have a regular GP in Australia but attends the local medical clinic if required. • The taxpayer wishes to be buried in country Y. Following is a summary of days the taxpayer and their spouse were present in country Y during the country Y tax year. Country Y tax year ended 31 December Days spent in country Y 2014 A 2013 B 2012 C 2011 D 2010* E 2009 F 2008 G 2007 H 2006** I 2005 J *In February 20XX the taxpayer's child started a degree in Australia and the taxpayer and their spouse were present in Australia assisting their child settling in to the course. **The taxpayer and their spouse also spent X days in the Country Y settling their other child into new accommodation and a university course in Country Y. Following is a summary of days the taxpayer and their spouse were present in Australia during the Australian tax year. Australian tax year ended 30 June Days spent in Australia 2015 - from 1 July 2014 to 31 December 2014 A 2014 B 2013 C 2012 D 2011 E 2010* F 2009 G 2008 H 2007 I 2006 J 2005 K *Once the taxpayer's child started their studies in Australia in February 20XX the taxpayer and their spouse began to holiday in Australia more regularly to visit their child. However, their presence in Australia has not exceeded 169 days in any Australian tax year ended 30 June. You consider that the taxpayer's behaviour in country Y is consistent with a person residing in country Y and not residing in Australia. That is to say the weight of evidence in favour of residing in country Y (i.e. family, home, lifestyle, assets, friends, doctor, social activities, habits etc.) far outweigh the factors of on-going but insignificant ties to Australia.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision: Summary: An 'Australian resident' is generally assessable on ordinary and statutory income derived from all sources, whether in or out of Australia, during the income year, respectively under sections 6-5(2) and 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997). In contrast, a 'non-resident' is generally assessable only on ordinary and statutory income derived from all Australian sources during the income year, respectively under sections 6-5(3) and 6-10(5) of the ITAA 1997. The term 'Australian resident' is defined in section 995-1 of the ITAA 1997 to mean 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' are defined in subsection 6(1) of the ITAA 1936 to mean: (a) a person, other than a company, who resides in Australia and includes a person- (i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia; (ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or (iii) who is: A. a member of the superannuation scheme established by deed under the Superannuation Act 1990; or B. an eligible employee for the purposes of the Superannuation Act 1976; or C. the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); and … Effectively, if a person does not reside in Australia, commonly referred to as 'residence according to ordinary concepts' that person may nevertheless be considered a resident of Australia if he or she satisfies any one of three additional statutory tests set out in paragraphs 6(1)(a)(i) to 6(1)(a) (iii) of the ITAA 1936. Simply stated, these tests are: (i) the domicile and permanent place of abode test; (ii) the 183 day test; and (iii) the superannuation fund test. | Detailed Reasoning - Residency for income tax purposes: The question of a taxpayer's residence is to be decided on a year-by-year basis so as to determine the taxpayer's annual liability to Australian income tax. Both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident in a country for a particular year. In Commissioners of Inland Revenue v. Lysaght [1928] A.C. 234, it was held that a decision on a question of 'residence' was a finding of fact. i.e., it is essentially a question of fact whether a person does or does not come within the meaning of that expression and that there is no technical or special meaning attached to the expression for the purposes of the Income Tax Act. Following this, the judgment by the High Court of Australia in Commissioner of Taxation v Miller [1946] HCA 23; 73 CLR 93 ('Miller') is considered as decisive in illustrating the way in which the question of "resident" or "not resident" has become a "question of degree and therefore of fact". In the present circumstances, the Taxpayer's 'residence' in each of the relevant income years will be determined separately with relevance to the Taxpayer's individual circumstances in those years including regard to the taxpayer's prior and subsequent history. | Detailed Reasoning - The ordinary concepts test: It was held in Miller that the primary test for deciding the residency status of an individual, for Australian income tax purposes, is whether the individual 'resides' in Australia. The term 'reside' is not defined in Australian income tax law and consequently it takes its ordinary meaning. The Macquarie Dictionary 5th Ed. (2009) defines 'reside' as 'to dwell permanently or for a considerable time, have one's abode for a time'. Whether a person 'resides' in a particular country is a question of fact and degree. Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia (TR 98/17) contains the Commissioner's interpretation of the ordinary meaning of the word 'resides' (within the definition of resident in subsection 6(1) of the ITAA 1936). TR 98/17 at paragraph 41 notes that quality of presence and time are to be considered when determining whether individuals reside in a place where they spend part of their lives ( Reid v. Commissioners of Inland Revenue (1926) 10 TC 673). TR 98/17 at paragraphs 42 to 63 provides a detailed examination of the following factors that are useful in describing the quality and character of an individual's behaviour in Australia: • Intention or purpose of presence; • Family and business/employment ties; • Maintenance and location of assets; and • Social and living arrangements. No single factor necessarily determines residency and many of these factors are interrelated. The period of a person's physical presence in Australia (or time) is not necessarily determinative of residency but it is an important factor when considering whether an individual resides here. | Detailed Reasoning - Current circumstances: Intention or purpose of presence • The taxpayer has spent the majority of their working life in overseas. • The taxpayer is a citizen of the Country Y and a Permanent Resident of another country. • They entered Australia in 19XX as a Permanent Resident for work purposes and worked here from 19XX to 19XX. • The taxpayer was given Australian citizenship in 19XX, to facilitate their frequent arrivals and departures from Australian airports. • Since 19XX, and for the years in question, they have returned overseas to live with their spouse. • Since 20XX, the taxpayer and their spouse have visited Australia more regularly on occasions for a holiday to visit their child, who lives and works here. Family and business/employment ties • The taxpayer has an extended family of over X individuals in country Y. • Their child lives and works in Australia. Maintenance and location of assets • The taxpayer bought a property in Australia in 19XX, which now serves as a holiday home when the taxpayer and their spouse visit their child who lives and works here. This property contains only the basic necessities. • The taxpayer's spouse owns the family home and another property in country Y. All valuables and sentimental items, including family photos, are stored in the family home in country Y. • The taxpayer owns a car in country Y and has no car in Australia. • The taxpayer has a bank account in their own name in country Y and a bank account held jointly with their spouse in Australia. Social and living arrangements • The taxpayer has an extended family of over X individuals in country Y. • The taxpayer does not have an extensive social network in Australia and has no family in Australia apart from their child. • The taxpayer and their spouse also belong to various clubs in country Y. • The taxpayer belongs to no clubs in Australia. • The taxpayer and their spouse also support various charities in country Y and none in Australia. • The taxpayer's doctor is in country Y. • The taxpayer does not have a regular GP in Australia but attends the local medical clinic if required. • The taxpayer wishes to be buried in country Y. We also note that once the taxpayer's child started their studies in Australia in February 20XX the taxpayer and their spouse began to spend more time in Australia, taking holidays here to visit their child. However, their presence in Australia has not exceeded 169 days in any Australian tax year ended 30 June. In most cases, we accept that a visit to Australia of less than six months is not sufficient time to be regarded as residing here (paragraph 62 of TR 98/17). The taxpayer and their spouse have also spent the majority of their time in country Y and consider country Y to be their home. | Detailed Reasoning - Conclusion: We consider, having regard to these factors that the taxpayer's behaviour in the overseas country is consistent with a person residing in country Y and not residing in Australia. That is to say the weight of evidence in favour of residing in country Y (i.e. family, home, lifestyle, assets, friends, doctor, social activities, habits etc.) far outweigh the factors of on-going but insignificant ties to Australia. In these circumstances, the taxpayer does not reside in Australia within the ordinary meaning of the word for the purpose of the definition of resident in section 6(1)(a) of the ITAA 1936. Furthermore, given that the taxpayer and their spouse are both domiciled in country Y and do not have Australian domicile, the taxpayer does not fall within the extended definition of resident of Australia under the 'domicile and permanent place of abode test' contained in subparagraph 6(1)(a)(i) of the ITAA 1936. Nor do subparagraphs 6(1)(a)(ii) and (iii) apply. (Also, in most cases, if an individual is not residing in Australia under ordinary concepts, their usual place of abode is outside Australia (see paragraph 37 of TR 98/17).)