Private ruling: Residency
Published: December 2013
Ruling period: Year ended 30 June 2013.
Date scheme commenced: 1 July 2012

Ruling: Question and answer: | Are you a resident of Australia for tax purposes while you are living in Country A? | Yes


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

Reasons for decision: Summary: Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose 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: 1. The resides test 2. The domicile test 3. The 183 day test 4. The superannuation test The first two tests are examined in detail in Taxation Ruling 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 considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other 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'. 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'. In considering the definition of 'reside', the courts have stated that the word ' reside' should be given the widest meaning. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - (i) Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Koitaki Para Rubber Estates Limited v Commissioner of Taxation [1941] HCA 13; 64 CLR 241, Williams J stated (at 64 CLR 241 at 249): Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place , together with an intention to return to that place and an attitude that the place remains home . You have been living in Country A but returned for a holiday of two months or less duration. You intend to return to Australia once your spouse's employment contract is completed. | Detailed Reasoning - (iii) History of residence and movements: You are a citizen of Australia who has previously worked here. You are living in Country A only for as long as your spouse has employment there. | Detailed Reasoning - (iv) Habits and "mode of life": You are living in Country A with your spouse in accommodation provided by their employer. You are not working in Country A. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country. The Administrative Appeals Tribunal (AAT) found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia. You have returned to Australia for a holiday of less than two months duration during which you did some temporary work. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: The purpose of your absence from Australia is to live with your spouse while they are employed in Country A. As stated above, you returned to Australia for a holiday and undertook some temporary work. | Detailed Reasoning - Family: You have accompanied your spouse while they are employed in country A. | Detailed Reasoning - Business or economic ties: You were working in Australia prior to you accompanying your spouse to Country A. You intend to return to Australia on completion of your spouse's employment in Country A. You are not working in Country A. | Detailed Reasoning - Assets: You have Australian superannuation and a home in Australia which you are currently renting out. You have a bank account in Country A. | Detailed Reasoning - Maintenance of Place of abode in Australia: You and your spouse will return to live in Australia on the completion of your spouse's employment in Country A. You own a property in Australia which you are currently renting out while you are overseas. | Summary: As stated above, no one single factor is decisive, the weight given to each factor depends on individual circumstances, and the word 'reside' should be given the widest meaning. There are various factors outlined above which indicate that you will not cease to be a resident of Australia while you are overseas. Specifically: · You will not be working in Country A, and you are only living in Country A while your spouse is working there; · You intend to return to Australia to live when your spouse's employment contract is completed; · You returned to Australia and worked for a period; · You have a house in Australia (being rented out while you are overseas); and · You are an Australian citizen. You will be a resident under the resides test of residency for the income tax year ending 30 June 20XX. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency.

Your country of origin is Australia. | You departed Australia to accompany your spouse to Country A where they are working. You are not working in Country A. | Your spouse has employment in Country A for a certain period of time. | You returned to Australia for a holiday and during that time you undertook some temporary work. | You have been living in a house provided by your spouse's employer. | You have a property in Australia which you are currently renting out while you are overseas, and some Australian superannuation. | You are not and have not been a Commonwealth Government employee.