Private ruling: Residency
Date of advice: 10 September 2015
Published: September 2015
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2016

Ruling: Question and answer: | Are you a resident of Australia for tax purposes? | Yes.

Relevant facts and circumstances: You are a citizen of Australia. Your country of origin is Australia. You are recently retired. You and your spouse have occupied a property you jointly purchased in a foreign country. Your spouse retired several years ago. You and your spouse intend to remain in retirement and not engage in any form of employment. You and your spouse propose to continue to travel as you have done in the past. You and your spouse consider your house in Australia as your principal and permanent home and your intentions are to retain your home in Australia as your normal place of residence, to which you will return. Meanwhile it remains the address for key administrative and financial matters in a foreign country and Australia. It will be occupied either by family members or rented during your absence. After leaving for a foreign country, your child continued to reside in your home in Australia until they purchased an apartment. Thereafter you made your Australian home available for renting and it has been rented. The tenants recently exercised an option for a further 12 months. All your household goods and private possessions are stored in a secured part of the property in Australia as you intend to return to reside there in due course. All your family (children, grandchildren, parent, siblings and their families) reside in Australia. You have no family ties in a foreign country. Your centre of family interests is in Australia and you expect that to continue. You have spent the majority of your time in a foreign country but you have returned to Australia each year (for about a month) to deal with financial and family commitments. In the second half of next year (2016), you are making arrangements to be in Australia for at least 3-4 months during which time friends will be house-sitting your property in a foreign country. During your stay in a foreign country to date you have undertaken works to improve the property (house and land), travelled a little, mainly in a foreign country, engaged in cultural exchange activities in organized arts, language and sport. You do not ever intend to rent the property. You will maintain your property overseas as a secondary and holiday home. At no stage do you plan to rent the property in a foreign country. You intend to make the foreign house available to friends and family to stay in free of charge as your guests or during periods that it is vacant. You would like to continue to make improvements to the foreign property until you reach retirement age. You will also continue foreign language lessons, voluntarily assist non-English speakers with the English language, engage in other cultural exchange activities and do some more travel. You have relied on your savings and retirement income to meet living expenses. The income from renting your home in Australian has largely been used to supplement your superannuation account which is the primary means of support for you both. While you are under retirement age you will continue to make superannuation contributions where possible. You will derive no income from activity in a foreign country except a small amount of income from savings accounts set up to meet your living expenses in a foreign country and expenses related to property improvements. Your health care providers are Australia-based and you have retained private comprehensive insurance to cover you for unforseen events during your time away from Australia. You have suspended your Australian private health insurance during your absence but intend to reactivate it on your return. You are not recipients of social health service benefits in the foreign country nor are you registered in the foreign country social system. While your spouse needs no permit to stay in a foreign country, you have been required to apply annually to the foreign authorities for renewal of a permit to stay in a foreign country. This requires proof of marriage, proof of financial resources and proof of insurance cover, among other things. You prefer to have your financial affairs and tax reporting based in Australia due to familiarity with it and simplicity and note that your pension is currently taxable in Australia. You continue to report your financial circumstances annually to the ATO as necessary. This year you were exempted from submitting a return due to the low level of taxable income. You would like to continue to report to the ATO as required and for your pension to remain taxable in Australia. When requested by the bank in a foreign country, we will submit proof that you are reporting to the ATO annually. This has occurred regularly in the past and is anticipated to continue. Your centre of economic interest is in Australia. You would also like to maintain your current sources of income and use temporary rental income from your home in Australia to supplement your superannuation account until you reach the retirement age to make better provision for your future retirement income while it is still possible to make concessional contributions to your superannuation. You would do this with rental income from your home in Australia during your absence. You would continue to make periodic transfers from your Australian bank account to your bank account in the foreign country to meet living expenses in that country.

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

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: • the resides test, • the domicile test, • the 183 day test, and • the superannuation 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 an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: (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. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. In your case: • you are a citizen of Australia and your country of origin is Australia • you retired and your spouse have occupied a dwelling you jointly purchased in a foreign country the year before • your foreign property is a holiday home • you have spent the majority of your time in a foreign country but you have returned to Australia each year (for about a month) to deal with financial and family commitments • the purpose of your stay in a foreign country is an extended 'cultural experience' holiday • you and your spouse consider your house in Australia as your principal and permanent home and your intentions are to retain your home in Australia as your normal place of residence, to which you will return. It remains the address for key administrative and financial matters in a foreign country and Australia. It will be occupied either by family members or rented during your absence • all your household goods and private possessions are stored in a secured part of the property in Australia and you intend to return to reside there in due course • all your family (children, grandchildren, parent and siblings and their families) reside in Australia. You have no family ties in a foreign country. Your centre of family interests is in Australia and we expect that to continue • in the second half of 2016, you are making arrangements to be in Australia for at least 3-4 months during which time friends will be house-sitting your property in a foreign country; which you do not rent out • you have relied on your savings and retirement income from Australia to meet living expenses while the income from renting your home in Australian has largely been used to supplement your superannuation account which is the primary means of support for you both. While you are under retirement age you will continue to make superannuation contributions where possible • you will derive no income from activity in a foreign country except a small amount of income from savings accounts • you intend to live in a foreign country and travel before returning to Australia permanently Based on the facts provided, you will still be residing in Australia according to the ordinary meaning of the word because, although you will spend most of your time in a foreign country (and travelling around), your time overseas is in fact an extended holiday. Therefore, you are a resident of Australia under the resides test. The other three statutory tests of residency do not need to be considered. | Detailed Reasoning - Your residency status: As you are a resident of Australia under one of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are considered to be an Australian resident for taxation purposes.