Private ruling: Residency status
Date of advice: 19 December 2016
Published: May 2017
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20ZZ
Date scheme commenced: 1 July 20XX

Ruling: Will you be a non-resident of Australia for tax purposes from date B? | Yes

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You departed Australia on date A in the 20WW-XX income year. You initially travelled overseas for some months. Prior to your departure you lived in your parent's home in Australia on a permanent basis. The purpose of your overseas visit was to live and work in Country X. You formed your intention to make your home indefinitely outside Australia approximately six months before your departure. You have been living in Country X for more than 15 months since date B. You have been living in an apartment in Country X which you began renting a couple of months after you moved to Country X. The lease is for more than 12 months. You do not own any property in Australia. You have been employed since the end of the 20XX calendar year in Country X on a permanent full time basis and there is no end date to your employment contract. Your employer is willing to sponsor your permanent residency application in Country X. You do not have a position or job being held for you in Australia. Your assets overseas include a bicycle, household effects and some bank accounts. Prior to leaving Australia you sold your household effects or gave them away. You have no formal social or sporting connections in Australia. You have a circle of friends and family in Australia. You have no formal social or sporting connections in Country X. You have a circle of friends in Country X. Your visa expires after 30 June 20ZZ so at this stage you plan to return to Australia. However, this plan could change due to your current employment. You returned to Australia for about a week since leaving Australia. No family members accompanied you overseas. You are single with no dependants. You do not hold a position with the Commonwealth Government of Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 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 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 for the period date B to 30 June 20ZZ. Prior to date B, although you were travelling overseas, we consider you were still a resident of Australia as going overseas for a holiday does not make a person a non-resident for tax purposes. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test. | Detailed Reasoning - The domicile and permanent place of abode test: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of 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 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. Your domicile is Australia because your country of origin is Australia and you are an Australian citizen. Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - 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 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. 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. Income Tax Ruling IT 2650 is entitled Residency - permanent place of abode outside Australia and sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; (c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayer's presence in the overseas country; and (f) durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as Centrelink that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. Paragraph 24 of IT 2650 instructs that the weight of each factor will vary with individual circumstances and no single factor is decisive. However, 'greater weight should be given to factors (c) the establishment of a home outside Australia, (e) the duration and continuity of the individual's presence in the overseas country and (f) the durability of association that the individual has with a particular place in Australia than to the remaining factors'. Weighing all the factors above in light of your individual circumstances, you have established a permanent place of abode outside Australia for the following reasons: ● You went to Country X on date B with the intention of living and working there. ● You have been living in Country X for more than 15 months. ● You have been living in long term accommodation, being an apartment in Country X. ● You have been employed since the end of the 20XX calendar year in Country X on a permanent full time basis and there is no end date to your employment contract. It is likely you will need to apply for permanent residency to manage the implementation through to completion. Your employer is willing to sponsor your permanent residency application in Country X. ● You do not have a position or job being held for you in Australia. ● Your assets overseas include a bicycle, household effects and some bank accounts. You do not have any household effects in Australia. ● You have a circle of friends in Country X. ● You are a single person without dependants in Australia. Weighing all the factors above in light of your individual circumstances, you have established a permanent place of abode outside Australia. Your connections with Country X are stronger than your connections with Australia. Whilst you formed your intention to make your home indefinitely outside Australia six months prior to leaving Australia, and spent several months outside Australia travelling, we consider that you did not establish a permanent place of abode outside Australia until 20XX when you arrived in Country X with the intention of living and working there. As the Commissioner is satisfied that you had a permanent place of abode outside Australia, you are not a resident of Australia for income tax purposes under this test for the period date B to 30 June 20ZZ. | 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. As you will not be in Australia for 183 days during any year of income for the period 1 July 20XX to 30 June 20ZZ, you are not a resident of Australia for income tax purposes under this test. | Detailed Reasoning - Superannuation test: Based on the facts you have provided this test is not relevant in your situation as it only applies to persons eligible to contribute to the superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years. You do not hold a position with the Commonwealth Government of Australia. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you will not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 between the period date B to 30 June 20ZZ Accordingly, you will not be a resident of Australia for taxation purposes during that time.