Private ruling: Residency
Published: January 2012



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) advises that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non-resident of Australia for taxation purposes, your assessable income includes only income from an Australian source. Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purpose 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. 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: Residency - Permanent Place of Abode outside Australia . 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests. | Detailed Reasoning - The resides test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), 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'. You left Australia to work and live overseas a number of years ago. You are therefore not residing in Australia according to ordinary concepts and you are not a resident of Australia for tax purposes according to this test. | Detailed Reasoning - The domicile test: If a person has 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. Domicile There are essentially 3 types of domicile that an individual can have: § the domicile of origin; § the domicile of choice; and § The domicile of dependency. Basically, the domicile of origin of an individual is where the individual was born. 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. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind. In your case, you were born in Australia; therefore, your domicile of origin is Australia. You intend to live and work overseas for an indefinite period. You do not have permanent residency of any overseas country . Therefore, you have not proven an intention to make the overseas country your home indefinitely and your domicile remains Australia. As your domicile is Australia, you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. 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. An individual who establishes his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent. In your case: § You left Australia to work overseas § You have been working for the same employer since you arrived in the overseas country § You have a girlfriend overseas § You rent an apartment which you have furnished and decorated at your own expense § You do not intend to return to live and work in Australia in the near future The Commissioner is satisfied that you have established a permanent place of abode outside Australia therefore you are not a resident under this test. | Detailed Reasoning - The 183 day test: When 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 currently make two trips back to Australia each year. You do not intend to be present in Australia for more than 6 months in any one 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 Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. This test does not apply to you. | Detailed Reasoning - Your residency status: You are a non-resident of Australia for taxation purposes from the from the date you departed Australia until you return to Australia to live. You are required to declare income derived in Australia in your income tax return. For the period prior to your departure overseas you were a resident of Australia for taxation purposes and you are required to lodge a tax return for this period declaring all income derived both in and outside Australia.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You were born in and are a citizen of Australia. | You departed Australia a number of years ago. | You intend to reside overseas for the near future and you are not sure if you will return to Australia to live. | You visit Australia twice a year for a number of weeks to visit friends. | You have a rented apartment overseas which you have decorated and furnished at your own expense. | You intend this apartment to be your home for an indefinite period of time. | You have two overseas bank accounts and a portfolio of overseas shares. | You still have part ownership of a house you lived with your former spouse. | You do not have a permanent place to live in Australia. | You have bank accounts in Australia. | You have a work contract overseas. | you have no social or sporting connections with Australia. | You have established social connections overseas. | You have a de facto girlfriend overseas. | You pay full tax on your income overseas. | Neither you nor your spouse are currently or have ever been Commonwealth government employees.