Private ruling: Residency and leaving Australia
Date of advice: 17 February 2016
Published: April 2016
Ruling period: Year ended 30 June 2015. | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: January 2015

Ruling: Questions and answers | Are you a resident of Australia for taxation purposes while you are living overseas? | Yes


Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1). | Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision: Summary: An Australian resident for taxation purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) 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' are defined in subsection 6(1) of the ITAA 1936. The definition gives us a series of tests which assist in determining whether a person is a resident of Australia. These tests are: 1. residence according to ordinary concepts; 2. the domicile/permanent place of abode test; 3. the 183 day/usual place of abode test; or 4. the Commonwealth superannuation fund test. 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 you do not reside in Australia according to ordinary concepts, you may still be a resident of Australia for tax purposes if you meet the conditions of any one of the other three tests. Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia which provides guidelines for determining whether individuals who leave Australia to live overseas cease to be Australian residents for income tax purposes during their overseas stay. 1. Residency according to ordinary concepts test The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'. 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. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In your case, you will be residing in Australia for the purposes of the resides test for the following reasons: • You are an Australian Citizen. • You have resided in Country A for less than two years. A period of less than two years is generally considered to be transitory. • You have strong financial and social connections with Australia. • You did not intend to live in Country A indefinitely. • At the completion of your spouse volunteer work in Country A you will return to Australia. • You have maintained your place of abode in Australia | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test. | Detailed Reasoning - 2. 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. While you were living in Country A you maintained your principle place of residence in Australia. You have not been granted citizenship nor permanent residency in Country A. You have rented the property out to members of your family at significantly below market rates. You are returning to Australia. Your domicile of choice is therefore Australia. | Detailed Reasoning - Conclusion: As you meet both the resides and domicile tests it is not necessary to consider the other tests. | Detailed Reasoning - Please note:: Where you are a resident of Australia for taxation purposes you should lodge a taxation return in Australia for the relevant year including all income received from within Australia and outside of Australia. As Australia has a double tax agreement with Country A, you may receive a credit for tax paid on your overseas to cover the tax payable on that income in Australia.

Relevant facts: You are a citizen of Australia. | Your spouse left Australia to undertake volunteer work. | You and your family accompanied them. | You have been lodging Australia taxation returns while living overseas. You have been lodging as a resident of Australia. | You spent the first three months in Country A living in an apartment with friends. You then moved into rental accommodation for the following months. | You own a house in Australia. Family members are staying there while you are away. | You have joint bank accounts in in Australia. | Your household and personal effects are still in your house in Australia | You receive income in the form of donations from friends and supporters in Australia. | You own a motor vehicle and some furniture in Country A. You have a Country A bank account, but it does not have much capital in it. | You stay in contact with your church in Australia and various members. | The school your children attend in Australia keeps a place open for them and maintains contact with the children through videos, photos and stories. | You attend a small church in Country A. Your children are home schooled in Country A. | Your spouse serves on a board of directors for a small company in Country A. | You primarily look after your children and the household but also do some voluntary work. | You are not a member of the PSS or CSS Superannuation Scheme.