Private ruling: Residency for taxation purposes
Date of advice: 21 February 2018
Published: June 2018
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 April 2018

Ruling: Q1: Will you be a resident of Australia for taxation purposes during your year abroad? | A1: Yes

Relevant facts and circumstances: You are a citizen of Australia. You are currently a resident of Australia for taxation purposes You are enrolled in a course of study through the education provider You will be travelling to Country A to complete the last year of your studies During the year in Country A you will be renting a room in City B You will be receiving Centrelink youth allowance while in Country A You do not know if you will return to Australia after completion of the course of study You do not have family in Australia You do not have a family home in Australia You are renting a room through the education provider You have an active bank account in Australia You have removed your name from the electoral roll

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 (ordinary concepts) 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 Ruling 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 will be studying in Country A for approximately one year during which time you will be living in rental accommodation. Your physical presence and ‘mode of life’ will be that of a person living in Country A rather than residing in Australia. Based on the facts, you will not be residing in Australia according to ordinary concepts. Therefore, you will not be a resident of Australia for taxation purposes under this test. | Detailed Reasoning - The domicile (and permanent place of abode) test: Under this test, a person whose domicile is Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. 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 were born in Country B; therefore, your domicile of origin is Country B. You became a citizen of Australia; therefore, your domicile of choice is Australia. 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. The Commissioner is not satisfied that you will set up a permanent place of abode outside Australia for the following reasons: ● Your time in Country B is temporary in nature. ● You are maintaining you connection through Australia through your course of study and Centrelink payments ● The eligibility for Centrelink payments are partially assessed on being an Australian resident ● You have not taken any action to change your domicile to another country. You are a resident of Australia for taxation purposes under this test. | Detailed Reasoning - Conclusion – your residency status: Based on the facts you have provided, you satisfy the domicile test of residency as outlined in subsection 6(1) of the ITAA 1936. Therefore, you are a resident of Australia for taxation purposes.