Private ruling: Residency status
Date of advice: 24 September 2015
Published: November 2015
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2015

Ruling: Question and answer: | Are you a resident of Australia for income tax purposes? | No.

Relevant facts and circumstances: You were born in Australia and are a citizen of Australia and Country Y. The reason that you have Country Y citizenship is that you thought it may be useful in gaining entry into Country T, as Country T is a member of the large group of member countries. You are single with no dependants. You departed Australia to live and study in Country T for more than 3 years. While in Country T you will be on a student visa. The visa is valid as long as you maintain a lease agreement. While in Country T you will live in a rented apartment that you currently hold a one year lease. Prior to departing Australia you lived at your parent's home. Your assets in Australia consist of bank accounts, a motor vehicle and a superannuation account. You intend to return to Australia for number of weeks every few years for holiday purposes. You do not hold any overseas assets. You do not have any professional, social or sporting ties with either Australia or Country T. You have never been an employee of the Commonwealth Government of Australia. You intend to return to Australia once you have completed your studies.

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

Reasons for decision: Detailed Reasoning - Residency: 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. The first two tests are examined in detail in TAXATION RULING NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia . The latter two tests are relatively self-explanatory as they require the individual to either be physical present in Australia for a period greater than 183 days or be eligible to contribute to the PSS or CSS superannuation schemes. An individual need only satisfy the conditions of one of the four tests to be deemed a resident of Australia for income tax purposes. | 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. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) (Dempsey's case) 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 will not be residing in Australia according to the ordinary meaning of the word while living abroad. Significant in reaching this conclusion is that during this period you will only be physically in Australia for short period every few years. Further from the information that you have provided it is clear that you will establish a settled or usual abode in Country T. Therefore consistent with the principles established in Dempsey's case you will not be a resident of Australia under this test. | 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. In your case, your domicile of origin is Australia. It is not your intention to seek citizenship or permanent residency in Country T. It could be argued that after obtaining citizenship and leaving Australia you have elected Country y as your domicile of choice. However, as you have not chosen to physically live in Country Y, your Australian domicile will remain unchanged. Although your Australian domicile remains unchanged, the Commissioner has concluded that while living and studying in Country T you will have established a permanent place of abode outside of Australia. Important in reaching this conclusion is that you will living and studying in Country T for a significant period of time and while doing so will be living in long term leased accommodation. It has been determined that your Australian domicile will remain unchanged, however as it has been concluded that you will establish a permanent place of abode outside of Australia you will not be a resident of Australia under the domicile test. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You will not be physically present in Australia for a period of greater than 183 days during the each of the income years in question, therefore you will not be a resident of Australia under this test. | Detailed Reasoning - The Superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. You have never been a member of a CSS or PSS. Accordingly, you were not a resident under this test. | Detailed Reasoning - Your residency status: As you were not a resident of Australia under any of the tests of residency outlined under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you will not be an Australian resident for income tax purposes while living and studying in Country T.