Private ruling: Residency for taxation purposes
Date of advice: 30 July 2015
Published: July 2015
Ruling period: 1 July 2014 to 30 June 2015.
Date scheme commenced: 1 July 2014.

Ruling: Question and answer: | Were you a resident of Australia for taxation purposes between Date A and Date B? | No.

Relevant facts and circumstances: You were born in Country A and are a citizen of Country A. You came to Australia several years ago. You obtained an Australian permanent resident Visa several years ago. On Date A you left Australia and travelled to Country B to work. Your family travelled with you to Country B. Your intention was to stay in Country B for several years and you were employed there on a three year contract. For reasons beyond your control your contract was terminated and you returned to Australia sooner than expected. While you were in Country B you rented out your family home in Australia (your Australian home). The rental of your Australian home was managed by a real estate agency on normal commercial rental terms and there was a 12 month lease in place. When you returned to Australia on Date B you did not return to your Australian home. In Country B you and your family lived in a rented apartment paid for by your employer. Neither you or your spouse have ever been employed by the Australian government. You and your family were each issued resident visas which were linked to your employment in Country B and allowed you to live and work in Country B. You were a resident of Australia for tax purposes at the time you left Australia to go to Country B. You and your family remained in Country B for the whole period of time you were outside Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1(1). | Income Tax Assessment Act 1936 Section 6(1).

Reasons for decision: Summary: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax 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 it's 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 you have provided, the Commissioner considers you were not residing in Australia according to the ordinary meaning of the word 'resides' between Date A and Date B. As a result, you were not a resident of Australia for taxation purposes under this test during that time. | 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. 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. Your domicile of origin was outside Australia. However, we consider Australia became your domicile by choice when you obtained an Australian permanent resident visa. As a result, you will be a resident of Australia for taxation purposes under this test between Date A and Date B unless the Commissioner is satisfied you had a permanent place of abode outside Australia in that period. Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia specifies that a 'permanent place of abode' does not have to be everlasting or forever and does not mean an abode in which a person intends to live for the rest of their lives. In essence, Taxation Ruling IT 2650, specifies that a person's place of abode is where they live and is a question of fact to be determined in the light of all the factors a particular case Based on the facts you have provided, the Commissioner is satisfied you established a permanent place of abode in Country B between Date A and Date B. Accordingly, you will not be a resident of Australia for taxation purposes under this test during that time. | 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 considered 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 in Australia for more than 183 days during the financial year ended 30 June 20XX and will not be a resident for taxation purposes under this test for the period of time in question. | Detailed Reasoning - The superannuation test: The Commonwealth superannuation test does not apply to you. | 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 between Date A and Date B and you were not a resident of Australia for taxation purposes during that time.