Private ruling: Residency status
Published: August 2014

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: No. This ruling relates to the following periods Year ending 30 June 2014 Year ending 30 June 2015 Year ending 30 June 2016 Year ending 30 June 2017


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

Reasons for decision: Summary: Residency status is a question of fact. The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 6(1) of the ITAA 1936 provides four tests to determine whether a person is a resident of Australia for income tax purposes. These tests are: • the resides test; • the domicile and permanent place of abode test; • the 183 day test; and • the Commonwealth superannuation fund test. 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 considered to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The Macquarie Dictionary defines reside as to dwell permanently or for a considerable time, have ones abode for a time. The Shorter Oxford English Dictionary defines reside as to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place. As a general concept, residence includes two elements: physical presence and the intention to treat the place as home. The period of physical presence in Australia is not by itself decisive when determining whether an individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant in determining the residency status. No single factor is necessarily decisive. The following factors are useful when determining whether a person is residing in Australia: • intention or purpose of presence, • family and/or employment ties, • maintenance and location of assets, and • social and living arrangements. Residence was discussed in Joachim v FCT 2002 ATC 2088. In that case it was highlighted that the test is whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home. Recent case law decisions have considered the following factors are also relevant in determining whether a person is an Australian resident for taxation purposes: • physical presence in Australia • nationality • history of residence and movements • habits and mode of life • frequency, regularity and duration of visits to Australia • purpose of visits to or absences from Australia • family and business ties to different countries and • maintenance of place of abode. In your case, you moved to country A. You now have a permanent position in country A and intend to live in country A permanently. It is considered that you have not retained a continuity of association with Australia. Although you have family in Australia, these ties are not strong. Based on the factors listed above and your circumstances, we consider that you are not residing in Australia. Consequently you do not satisfy the 'resides test' and therefore it is necessary to consider the other three tests. | Detailed Reasoning - The domicile test and permanent place of abode: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person has only one domicile at the one time. A person retains the domicile of origin unless and until they acquire a domicile of choice in another country. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile. 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, for example, through having obtained a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice. In your case you were born in Australia and are a citizen here. Your domicile of origin is in Australia. Although you intend to live and work in country A permanently, you do not have a permanent or long term visa to stay there. It is not considered that your domicile is in country A. As your domicile remains in Australia, you will be considered an Australian resident unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. 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. The nature and quality of use which a taxpayer makes of a particular place of abode overseas is important ( FC of T v Applegate 79 ATC 4307; (1979) 9 ATR 899). The expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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. Taxation Ruling IT 2650 Income Tax: Residency - Permanent Place of Abode Outside Australia examines the factors to be taken into account in determining whether a person who leaves Australia to live overseas ceases to be an Australian resident during the absence. IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode: • the intended and actual length of stay in the overseas country • any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country • the establishment of a home outside Australia • the abandonment of any residence or place of abode in Australia • the duration and continuity of presence in the overseas country, and • the durability of association with a particular place in Australia. As highlighted in paragraph 25 of IT 2650, as a broad rule of thumb, a period of about two years or more would generally be regarded as a substantial period for the purposes of a taxpayer's stay in another country. It must be stressed, however, that the duration of the taxpayer's actual or intended stay out of Australia is not, of itself, conclusive and needs to be considered with all of the factors. In your case you intend to live and work in country A permanently. It is considered that your intention to live in country A and actions have shown you have established a permanent place of abode outside Australia. This is supported by the following: • you have a permanent employment contract in country A, • you have a private lease on a property and • you have social ties in country A. Applying the facts of your situation to the above criteria, it is considered that when offered your permanent employment position your intention changed and from that date you have a permanent place of abode in country A. As a result, you would not be considered a resident of Australia for income tax purposes under the domicile test. However before this date, it is considered that you did not have a permanent place of abode in country A and are therefore a resident of Australia. | Detailed Reasoning - The 183-day test: You are not in Australia for 183 days in the relevant years. You will not be a resident of Australia under this test. | Detailed Reasoning - The superannuation test: This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age). A person is a resident under this test if they are: n a member of the superannuation scheme established by deed under the Superannuation Act 1990 ; or n an eligible employee for the purposes of the Superannuation Act 1976 ; or n the spouse, or a child under 16, of a person covered by either of the above. You have not been employed by the Commonwealth government. You do not meet any of the other requirements of this test and you are not a resident under the superannuation test. | Summary: You do not satisfy any of the tests for Australian residency after the time you accepted the permanent job offer. Therefore you are not considered a resident of Australia for taxation purposes from this date.

Relevant facts: You were born in Australia and are an Australian citizen. | You moved to country A to take up a six month employment position. | You were offered and accepted a permanent position in country A. | You entered country A on a 12 month permit with multiple entries, work permit application and stay permit. | After 12 months your visa will be required to be renewed every 12 months. This is the longest period a visa is granted in country A. | You are a resident of country A. | Your visa/permit is provided to you by your employer. | You initially lived in employer provided accommodation. | You later moved out of your employer provided accommodation into an apartment that you are now leasing privately and have sole use of. | You have returned to Australia on two occasions. The combined length of your visits is less than three weeks. | During your recent visit you farewelled a relation, who is the only member of your family that you have much contact with. | You have other family in Australia; however, you do not have strong ties with them. | Prior to leaving Australia you lived in your own home. This home is currently on the market to be sold. | Apart from your home, you have a bank account, a small parcel of shares and some household effects in Australia. | Your overseas assets consist of a bank account, household and personal effects. You also intend to purchase a vehicle. | A portion of your foreign sourced income is being transferred to your Australian bank account to service your mortgage until your home is disposed of. | You do not have any social or sporting ties with Australia. | Your social and sporting ties with country A consist of friends and colleagues. | You do not have an employment position or job being held for you in Australia. | You have advised Medicare, your private health insurer, the Australian Electoral Commission, your bank and the financial institution that manages your shares that you have ceased being a resident of Australia for tax purposes. | You have never been a Commonwealth Government of Australia employee or been eligible to contribute the PSS or CSS. | You stated 'employment' as the reason for your initial departure from Australia on your immigration outgoing passenger. Leaving on your recent visit, you ticked departing visitor. | You intend to reside in country A indefinitely. You formed this intention after being offered the permanent position.