Private ruling: Residency
Published: July 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you a non-resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: Your country of origin is country X and you are a citizen of Australia. You left Australia to move to country Y to study for a year. You entered country Y on a student visa but now have a work visa which is renewable every two years for an indefinite period of time. It does not allow you to stay in country Y permanently but allows you to stay there if you are employed. You have an employment contract for another year which can be extended if your work visa is approved. Your visa also expires on this date. You will return to Australia to apply for an extension on your visa. If the work visa is approved you will seek to extend your employment contract which will be for a further two years. You are single with no dependants. Prior to leaving Australia you lived with your parents and also lived in rental accommodation. You do not have any assets in Australia other than a bank account. Since leaving Australia you have returned for short visits for a holiday and to apply for your work visa. You have been renting a shared apartment in country Y, you have also lived with relatives for short periods during your time in country Y and while you were studying you lived at the University campus. Your assets in country Y include a car, a bank account and an investment account. You have never been a Commonwealth Government of Australia employee.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Detailed Reasoning - Residency: 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | Detailed Reasoning - The resides (ordinary concepts) 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. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd 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.' In considering the definition of 'reside', the court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, it was stated that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. 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. You left Australia and have been living, studying and working in country Y since then. During your time away in country Y you have only returned to Australia for short holiday visits. | Detailed Reasoning - (ii) Nationality: Your country of origin is country X and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence: You lived and worked in Australia prior to leaving to moving to country Y. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. • You are living and working in country Y and have not travelled to any other countries since moving there. • You have been in country Y for nearly three years and plan to stay there for another few years while you are employed there. • For the past year and a half you have been living in rental accommodation. • You have settled into country Y making friends and spending time with some family members. • You hold a bank account; have purchased a car and applied for an investment account. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Since leaving Australia you have returned to Australia for short visits. You do not intend to return to Australia permanently for the next few years. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You moved to country Y for study and then you gained employment and have been there since. You have returned to Australia on three occasions for short visits for a holiday and on one occasion to apply for your work visa. | Detailed Reasoning - Family: Your immediate family members live in Australia. You are single with no dependants. You have some relatives who live in country Y and you have stayed with them for short periods. | Detailed Reasoning - Business or economic: You do not have any assets in Australia. Your assets in country Y include a motor vehicle, bank account and investment account. | Detailed Reasoning - (viii) Maintenance of Place of abode: You are living in a rental property in country Y. | Detailed Reasoning - Summary - resides test: You will not be residing in Australia due to the following factors: • you are living in country Y and have been living and working there for nearly three years • it is your intention to extend your current visa for another two years when it expires • you are living in rental accommodation in country Y • you do not have any assets in Australia • you have some assets in country Y • your behaviour in country Y is consistent with residing there In consideration of the factors outlined above, you will not be residing in Australia according to the ordinary meaning of the word 'reside'. | 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 183 day test, superannuation fund test and domicile and permanent place of abode tests. | Detailed Reasoning - Domicile and permanent place of abode: 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 you are still 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. 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; iii. 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; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. 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 the Department of Social Security 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. | Detailed Reasoning - Consideration of these factors: • You intend to live in country Y for at least another three years and have already been living there for nearly three years. • The purpose of you moving to country Y was to study and you have now gained full time employment. • You live in rental accommodation and have been living there for nearly a year. • You do not have any assets or property in Australia. The Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - 183 day: 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. As you will not be in Australia for more than one-half of the relevant income years this test is not relevant to your circumstances. | Detailed Reasoning - Superannuation fund 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 have never been a Commonwealth Government employee therefore this test does not apply to your circumstances. You are more than 16 years of age. | Detailed Reasoning - Conclusion - your residency status: As you do not meet any of the above tests, you are not a resident of Australia.