Private ruling: Residency
Published: August 2011
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011
Date scheme commenced: 1 July 2009

Ruling: Question and answer: | Were you a resident of Australia for taxation purposes for period A? | Yes. | Were you a resident of Australia for taxation purposes for period B? | No. | Were you a resident of Australia for taxation purposes for period C? | Yes.

Relevant facts and circumstances: You are an Australian citizen and you were born in Australia. You lived in Australia until you moved to a foreign country. Your intention in moving to the foreign country was to live there. You obtained a visa which was valid for a few years. You travelled before arriving in the foreign country. While you were in the foreign country you lived in rented accommodation. You had a bank account in the foreign country. You used this account to pay your bills as well as having you wages paid into it. You had full time employment in the foreign country. This was your only paid employment while in the foreign country. You were taxed on this income in the foreign country. You returned to Australia for personal reasons for a short time. This period in Australia did not exceed 183 days. You lived in the foreign country until a date on which you returned to Australia permanently. You now live with a relative. While in the foreign country you had no permanent residence in Australia, having moved out of the house you had been renting. You own no property in Australia. At the time you departed Australia, you had bank accounts and a credit card. You closed some accounts but kept the credit card and one bank account. You have Australian shares. You are the beneficiary of a trust fund but you do not have access to that account. The majority of your family reside in Australia. You have no family in the foreign country. You have never been married and you have no dependents. You have friends in both Australia and in the foreign country. You have no sporting associations in either Australia or the foreign country. You have never been Commonwealth Government of Australia employee. You are more than 16 years of age. Relevant legislation provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) Income Tax Assessment Act 1936 Subsection 6(1)


Reasons for decision: Summary: An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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. 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 . 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 considered to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. Taxation Ruling IT 2650 provides guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay. The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states: The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes. In your case, for the first part of period A, you were dwelling in Australia in rented accommodation. Therefore, you were residing in Australia for the first part of period A. As you have satisfied one of the four residency tests for this period, it is not necessary to consider the domicile, 183-day and superannuation tests for the first part of period A. For the second part of period A, you were travelling and were not residing in any particular place, including Australia or the foreign country. You had no settled abode or dwelling in these places. Accordingly, you were not considered to have been residing in Australia according to the ordinary meaning of the word 'resides' during the second part of period A. For period B, it cannot be said that you were dwelling in Australia, or that you had an abode in Australia. After leaving Australia and travelling for a few months, you settled in the foreign country where you lived and worked during this period. It is considered you were residing in the foreign country during this period. Accordingly, you were not residing in Australia according to the ordinary meaning of the word 'reside' for this period. For period C, you were living in Australia with a relative. You were residing in Australia during this period and so were a resident of Australia for tax purposes during this period under the resides test. As you have satisfied one of the four residency tests for this period, it is not necessary to consider the domicile, 183-day and superannuation tests for this period. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. In your case, as you were still an Australian citizen while living in overseas and in Australia, your domicile was Australia and remained unchanged. 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. For the second part of period A you were travelling. As you had not yet established yourself in the foreign country, you did not have a permanent place of abode outside of Australia and as your domicile remained Australia, it is therefore considered you were a resident of Australia under the domicile test during the second part of period A. As you have satisfied one of the four residency tests for this period, it is not necessary to consider 183-day and superannuation tests for this period. Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which may be used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include: · the intended and actual length of the taxpayer's stay in the overseas country · whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time · whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia · whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence · the duration and continuity of the taxpayer's presence in the overseas country and · the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. For period B you: · moved to the foreign country with the intention of living there · lived and worked in the foreign country · obtained a visa which was valid for a few years · maintained a residence in the foreign country in rented accommodation · had no permanent residence in Australia, having moved out of the house you had been renting · owned no property in Australia · had a bank account in the foreign country · had a bank account in Australia · had Australian shares · had friends in both Australia and in the foreign country · had no sporting associations in either Australia or the foreign country · had no spouse or children. For period B, on balance and based on the above, you were not a resident of Australia for taxation purposes for the period you resided in the foreign country. During this time, we consider that you had established a permanent place of abode in the foreign country and were therefore not a resident of Australia for taxation purposes under the domicile test during this period. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. In period B, you returned to Australia once. This period in Australia was not more than 183 days in the income year. Accordingly, you were not present in Australia for more that 183 days in any income year. Therefore, you were not a resident of Australia under the 183-day test during period B. | 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. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You have stated that you have never worked for the Commonwealth Government of Australia. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you had no spouse or children and are more than 16 years of age. Therefore, you were not a resident of Australia under the superannuation test during period B. | Detailed Reasoning - Conclusion: For the first part of period A you were a resident of Australia under the resides test and for the second part of period A were a resident of Australia under the domicile test. Therefore, you were a resident of Australia for taxation purposes for the whole of period A. For period B, you were not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997. Therefore, you are not considered to have been an Australian resident for taxation purposes during this period. For period C you were a resident of Australia for taxation purposes under the resides test.

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