Private ruling: Residency for tax purposes
Date of advice: 19 September 2018
Published: October 2018
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: XX/XX/2010

Ruling: Q1: Are you a resident of Australia for income tax purposes? | A1: Yes

Relevant facts and circumstances: You are citizen of Australia since 20XX after immigrating in 20XX. Your country of birth is country Y. You travelled to country Z for work in 20XX and have worked there since that time. You had yourself removed from the electoral roll and terminated your private health insurance in Australia You have a work visa arranged by your employer valid until 20XX. You applied for permanent residency of country Z which has recently been granted. You are a tax resident of country Z. You have rented X apartments in country Z Clothing, furniture, sports equipment and cash balances are held in country Z. Bank accounts, loans, credit cards and comprehensive medical insurance are held in country Z. You have interests in real estate in Australia. Since arriving in country Z you have developed a circle of friends and have been an active member of sporting and recreational clubs. Your spouse and children have remained in Australia to complete schooling. They continue to live in the home that you and the family lived in for approximately X years prior to you finding work in country Z. Your spouse has visited you from time to time. Your spouse intends to move to country Z once the youngest children are in university. During your time country Z you have returned to Australia on a regular basis to see your spouse and children and also to undertake work for your employer. During the income years in question, in total you have spent more time in Australia than in country Z.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(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. The AAT has recognised that a person who has established a home at a particular place does not necessarily cease to reside there because he or she is physically absent if he or she maintains a continuity of association with the place ( Joachim v. Federal Commissioner of Taxation [2002] AATA 610; 2002 ATC 2088; (2002) 50 ATR 1072; Sneddon v. Federal Commissioner of Taxation [2012] AATA 516; 2012 ATC 10-264; Iyengar v. Federal Commissioner of Taxation [2011] AATA 856; (2011) 2011 ATC 10-222; Re ZKBN and Federal Commissioner of Taxation [2013] AATA 604; 2013 ATC 1-057; (2013) 96 ATR 201). Some of your circumstances support your view that you have not resided in Australia since you first departed to work in country Z. These include: ● You been working in country Z for a substantial period of time. ● You have developed a circle of friends and been an active member of recreational and sporting clubs. ● You hold assets and medical insurance. ● You had yourself removed from the electoral roll and terminated your private health insurance in country Z It is also noted that you are a tax resident of country Z and have been granted permanent residency there. However, a person can be a resident of more than one country under the respective tax laws of those countries. This is why many double tax agreements contain tie-breaker provisions to assign residency to one of the countries for the purposes of the double tax agreement. The facts that indicate that you resided in Australia during the income years in question include: ● Your immediate family remained in Australia. ● You maintain significant assets in Australia being interests in real estate. ● You returned to Australia on numerous occasions. ● In total you spent more time in Australia than you did in country Z during the income years in question. You established a home in Australia before finding employment in country Z. Your spouse and children remain in that home and you have travelled back often to spend time with them. In total you have spent more time in Australia than in country Z during the years in question. You have clearly maintained a continuity of association with that home in Australia. Although some of your circumstances may point towards you being a non-resident, the most significant facts are that during each income year in question you have spent substantial periods of time with your family in the family home that you lived in prior to your departure. It is considered that during those income years you have satisfied the resides test under the ordinary meaning of ‘resides’.