Private ruling: Residency
Date of advice: 1 September 2015
Published: September 2015
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | No.

Relevant facts and circumstances: You were born in Australia and are a citizen of Australia. You are an engineer. You are employed by a company on a contract basis. You have previously worked on another country in this role. You received a new assignment to work in another foreign country for more than two years. You have a spouse and adult children. Your spouse lives with you in a foreign country and expects to remain with you there for the duration of the assignment. You and your spouse flew into a foreign country directly from your previous assignment and you stated that you were migrating to a foreign country for work purposes. You and your spouse intend to return to Australia at the end of the assignment in a foreign country. Neither you nor your spouse intends becoming a citizen of the foreign country or of any other country. You and your spouse are living in a rented apartment in a foreign country which is for your sole use during the assignment. Your employer has provided you with financial support for this accommodation. In a foreign country, you and your spouse have assets: • a bank account • a car and • a motorbike. Your employer continues to contribute superannuation into your Australian superannuation fund. You and your spouse have suspended your Australian private health insurance policy and intend to reactivate it when you return to Australia from a foreign country. You and your spouse maintain your Medicare membership whilst living in a foreign country. You and your spouse still own your family home in Australia. The family home is being rented (fully furnished) to your adult children. You declare the rental property income in your Australian tax return. Prior to leaving Australia on your first overseas assignment, you purchased a number of rental properties in the income year ended 30 June 20XX. During your entire time on overseas assignments you maintained an Australian bank account. You have not advised your bank to deduct any non-resident withholding tax from any of your bank accounts. You and your spouse have recently had your details removed from the Australian electoral roll with the intention of reapplying once you return to Australia. You and spouse both returned to Australia for short visits totally less than 183 days of the income year of the ruling. Neither you nor your spouse has ever been an employee of the Commonwealth Government of Australia. You are more than 16 years old.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 • the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 a resident of Australia for tax 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 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. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia, specifically: • You are an engineer employed by a company on a contract basis. • You have previously worked overseas in this role. • You received a new assignment requiring you to work in a foreign country for more than two years. • Your spouse lives with you in a foreign country and expects to remain with you there for the duration of the assignment. • You and your spouse flew into a foreign country directly from your previous assignment in and you stated that you were migrating to a foreign country for work purposes. • You and your spouse intend to return to Australia at the end of the assignment in a foreign country. • You and your spouse are living in a rented apartment in a foreign country which is for your sole use during the assignment. • You and your spouse have assets in a foreign country: • a bank account • a car and • a motorbike. • You and your spouse have suspended your Australian private health insurance policy and intend to reactivate it when you return to Australia from a foreign country. • You and your spouse still own your family home in Australia. The family home is being rented (fully furnished) to your adult children. Based on a consideration of all of the factors outlined above, you were not a resident of Australia according to ordinary concepts as you did not maintain a continuity of association with Australia for the period of the ruling. | Detailed Reasoning - The domicile and permanent place of abode test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. Domicile A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. As you are still an Australian citizen while living and working in a foreign country, your domicile is Australia and remains unchanged. Permanent place of abode 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. 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. • You moved to a foreign country to live and work • Your spouse moved the a foreign country to live with you • You and your spouse still own your family home in Australia. The family home is being rented (fully furnished) to your adult children • You and your spouse live in rented accommodation which is for your exclusive use. Although you and your spouse intend returning to Australia at the end of your assignment in a foreign country and the rented accommodation you live in is not everlasting or forever, nevertheless it is considered that you have set up a permanent place of abode in a foreign country. The Commissioner is satisfied you have a permanent place of abode outside of Australia. Therefore, you will not be a resident of Australia under the 'domicile and permanent place of abode' test of residency. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You were not present in Australia for a total period of more than half of the year of income. Therefore you were not a resident of Australia under the 183-day test for the income year of the ruling. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (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. Neither you nor your spouse has ever been an employee of the Commonwealth Government and you are more than 16 years old. Neither you nor your spouse is eligible to contribute to the PSS or CSS. Therefore, you were not a resident of Australia under the superannuation test for the income year of the ruling. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any 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 not considered to be an Australian resident for taxation purposes.