Private ruling: Residency
Date of advice: 11 March 2016
Published: May 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: The scheme has commenced

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

Relevant facts and circumstances: You were born in foreign country X. You became a citizen of Australia. You have been living and working in Australia since you finished your study in Australia. You have signed a 3-year contract with your current employer to be posted to foreign country X. This position is treated as an international assignment by your current employer; therefore, you will remain to be paid by Australian employer. Your contract states that one of three options is to find an equivalent role in Australia at the conclusion of your assignment. However, you state that the possibility is extremely low as the company structure will be changed. You are currently organising the work permit and expected to depart for foreign country X in Month 20XX. The work permit is required to be renewed annually. You spouse will accompany you to foreign country X during the assignment. Your employer will provide a leased property in foreign country X for you and your spouse during the assignment. Your Australian employer will continue to pay superannuation guarantee to your super account. However, you will cease to make further voluntary contribution. Your intention is to seek further employment in foreign country X and to purchase your own property after the assignment is finished. You and your spouse have a house in Australia in which you currently live with your children. You children are over 18 years old. They currently are studying in an Australian University. You intend to keep the house and the furniture for you children and you will transfer all the bills to their names. You and your spouse are not members of any clubs or associations in Australia. You will keep your Australian bank account for your salary and wages. However, you will open a new bank account in foreign country X. You intend to visit Australia twice or less a year. You and your spouse will remove your names from the Australian electoral roll. 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 [2014] 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 will not be residing in Australia according to the ordinary meaning of the word; therefore, you will not be a resident of Australia for taxation purposes after your departure. | 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. | Detailed Reasoning - Domicile: 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 were born in foreign country X and you were a citizen of foreign country X; therefore, your domicile of origin is foreign country X. You became a citizen of Australia; therefore, your domicile of choice is Australia. | Detailed Reasoning - Permanent place of abode: It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1852) 117 E.R. 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." In your case, there are various factors that indicate that you will establish a permanent place of abode outside of Australia. Specifically: • your spouse will accompany you to Country X during the assignment; • your employer will provide a leased property in Country X for you and your spouse during the assignment; • most of your family members live in Country X; and • you intend to seek further employment in Country X and purchase your own property in Country X after the assignment finished Based on the information provided, the Commissioner is satisfied that you will establish a permanent place of abode outside of Australia. Therefore, you will not be a resident of Australia for taxation purposes under this test after you departure. | 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. You will not be 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 will not be a resident of Australia for taxation purposes under this test as you are not 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 will not be a resident of Australia for taxation purposes after you departure.