Private ruling: Residency for Australian taxation purposes
Date of advice: 12 December 2017
Published: May 2018
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Were you a resident of Australia for income tax purposes for the financial year 2014? | A1: No

Relevant facts and circumstances: You were born in Australia. You are a citizen of Australia. You were offered a job with Employer A, a contractor based in Country A in 2007. You departed for the Country A in 2008. You were not required to have a visa to enter Country A, but you were required to have a work permit to be employed and remain in Country A. Your employer sponsored you with a Country A work permit. You applied for an extension when your work permit expired and were granted an extension. You applied for and were granted Country A Citizenship in 2014, which confers the right to permanent residency in Country A. You continued working for Employer A until you retired. You lived in Country A from the time of your arrival in 2008 until you departed in 2015. Your employer did not provide you with accommodation. The flats were rented by you for your exclusive use, with the exception of two short periods where you shared with others. You commenced travelling full time in 2015 from Country A. You bought an apartment in Country B in 2016. Prior to your departure for Country A to take up a position, you lived in your own home. The property was jointly owned by you and your spouse. Your family did not accompany you to Country A in 2008. You were divorced in 20XX; your ex-spouse now has the full ownership of the property. All of the household effects and cars went to your ex-spouse as part of the divorce settlement. You had investments when you departed for Country A in 2008; however, all of the investments in your name were either transferred or cashed out to make up the divorce settlement. You have a self-managed super fund (SMSF) in Australia. You have made some visits to Australia since you departed for Country A in 2008. You maintain two bank accounts in Australia; you use them to access money and other payments. You have not advised your Australian bank of your absence from Australia for an indefinite period of time. Apart from the apartment in Country B, you have a pension fund and two bank accounts in Country A. You lodged Country A tax returns for each year you had income in Country A. You lodged Australian income tax returns as a non-resident; you had advised the Australian Taxation Office (ATO) with a return that you would not be lodging tax returns for the foreseeable future. You have advised the Australian Electoral Office to have your name removed from the electoral roll. You have advised your private health insurer of your absence from Australia. You have advised Medicare to have your name removed from their records. You and your ex-spouse have never been 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) Detailed reasoning | 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. | The resides test | The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. | Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the ‘resides’ test: | (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. | These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruing IT 2650 - Income tax: residency – permanent place of abode outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia . | It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | In your case, you accepted a job in Country A and you departed for Country A on 2008. Your family did not accompany you to Country A for different reasons. You owned a property in Australia which was your main residence. | You were divorced; your Australian property and household effects and cars were either transferred or cashed out to make up the divorce settlement. | You remained in Country A for the full period of your work permit, at the end of which you applied for an extension and were granted an extension. | To apply these rules in your case, based on the facts of you have provided, you were not a resident of Australia for income tax purposes . | 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. | 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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. | You were born in Australia and you are an Australian citizen. You were granted Country A citizenship in 2014. By obtaining Country A citizenship Country A became your domicile of choice, you have left Country A but you have not taken steps to either revert to your domicile of birth, Australia, or make another country your domicile of choice. Therefore your domicile remains Country A. | You were not a resident of Australia for income tax purposes under this test. | 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. | You were not a resident of Australia for income tax purposes under this test. | 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 were not a resident of Australia for taxation purposes under this test as neither you nor your ex-spouse are, or were, employed by the Australian Commonwealth government. | 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 were not a resident for taxation purposes from the time you departed Australia in 2008 to the current financial year.