Private ruling: Residency
Date of advice: 23 March 2016
Published: May 2016
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: No

Relevant facts and circumstances: You are an Australian citizen. You have been living and working in overseas countries since 20XX. You entered each of the overseas countries on working visas provided by your employers. You state that you held both a temporary residents permit/Alien card and a working permit/working visa in most countries. In the foreign country X, your initial working visa was replaced by a temporary resident passport as a result of your employment in that country. While working in overseas countries, you resided in either employer provided accommodations or private rental properties. You state that while working in the foreign country X, your employer paid tax for you in that country. You lived with your spouse in the foreign country X and then moved together to foreign country Y in 20XX after your contract ended in 20XX. Your current work contract in foreign country Z is for 2 years with option for additional 2 years. You are divorced from your first spouse and have X children who live in Australia. You state that you do not have a place to live in Australia. Your Australian family home was signed over to your ex-spouse after divorce was finalised. You made payments to your ex-spouse in accordance with the terms of your divorce and you also provided for child support for each child up to the age of 18 and further supported them at university. You had a bank account in the foreign country X into which your salary was paid. You maintain bank accounts in other overseas countries. You maintain one bank account in Australia which is used for the repayment of a mortgage on the block of land you own in Australia. You also use this bank account to meet other expenses in relation to that property. You maintain a storage locker in Australia for personal items. You do not intend to transport them to you because of the cost. You maintain one SMSF fund in Australia. You do not have any social or sporting connections with Australia. You have advised your private health insurer of your absence from Australia and have taken out international health insurance cover. You have advised your Australian bank of your absence from Australia for an extended indefinite period of time. Your intention has been to leave Australia permanently. You and your spouse are not Commonwealth Government of Australia employees for superannuation purposes.

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

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three 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'. 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 AATA 335 (29 May 2014) 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, the Commissioner accepts that you do not reside in Australia according to the ordinary meaning of the word; therefore, you are not a resident of Australia for taxation purposes. | 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. 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. In your case, you are a citizen of Australia. You have been living and working in overseas countries since 20XX. You took a job in the foreign country X. While working in the foreign country X, you formed a relationship with a partner, set up a home with your partner and married your partner. After contract ended, you moved to foreign country Y with your spouse. You and your spouse are living in foreign country Z because of a job contract in that country. Based on the information provided, we do not consider you an Australian resident for taxation purposes under the domicile test. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. In your case, it is considered that your usual place of abode is outside Australia. Therefore, you are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - Superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse currently contribute to certain superannuation funds for Commonwealth government employees. You are not a resident of Australia for taxation purposes under this test as neither you nor your spouse are employed by the Australian Commonwealth government. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Therefore, you are not a resident for taxation purposes in the relevant financial years.