Private ruling: Residency
Date of advice: 4 December 2016
Published: February 2016
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 19 August 2014

Ruling: Question and answer | Were you a resident of Australia for taxation purpose until your spouse joined you overseas? | Yes. | Are you a resident of Australia for taxation purposes from when your spouse joined you? | No.

Relevant facts and circumstances: You were born in Country Y. You are a citizen of both country Y and Australia. You went to Country Z to live and work. You have a work contract which is for an indefinite period of time in Country Z. You do not intend on returning to Australia to live permanently. You intend on obtaining permanent residency in Country Z which will take less than 10 years. Your children joined you in Country Z some months after your arrival. Your spouse joined you in Country Z some months after your children. You and your spouse have separated and they have returned to Australia to live and taken the children with them. You sold your house in Australia. You rent your own accommodation in Country Z and you do not receive any assistance from your employer with the costs associated with the property. You will return to Australia to visit your children each year and these trips will not exceed 183 days in any financial year. You have a bank account and superannuation funds in Australia. You have taken all your worldly possessions to Country Z. Neither you nor your spouse are eligible to contribute to the relevant Commonwealth superannuation funds.

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 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: • resides test • domicile and permanent place of abode test • 183 day test and • Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | 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 IT 2650 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. You went to Country Z for work purposes. Your children and spouse joined you in Country Z. You do not intend on returning to Australia to live. In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. Based on the facts above you were residing in Australia according to ordinary concepts until your spouse joined you as you retained a continuity of association with Australia as your spouse remained in Australia until they joined you in Country Z . You were a resident of Australia for taxation purposes until your spouse joined you overseas. After your spouse joined you no longer have a continuing association with Australia and you will no longer be a resident of Australia for taxation purposes. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. 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. Your domicile of origin is Country Y. Your domicile of choice is Australia. The Commissioner is satisfied that you had a permanent place of abode outside Australia for the following reasons: • You have gone to Country Z for work purposes • You rent accommodation in Country Z • You have taken all your possessions to Country Z • You do not intend on returning to Australia to live permanently You are not a resident under this test from when your spouse joined you. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that 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 in Australia for more than 183 days in any financial year. You are not a resident under this test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You and your spouse are not eligible to contribute to the relevant Commonwealth super fund. You are not a resident under this test. | Detailed Reasoning - Your residency status: You were a resident of Australia for taxation purposes until your spouse joined you overseas. You are not a resident of Australia for taxation purposes from when your spouse joined you overseas.