Private ruling: Residency status
Date of advice: 25 January 2019
Published: May 2019
Ruling period: Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 July 2019

Ruling: Q1: Are you an Australian resident for taxation purposes? | A1: Yes.


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. 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. Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia provides guidelines. Although you are not a migrant entering Australia, the ruling outlines some relevant principles. As highlighted in TR 98/17 the quality and character of an individual’s behaviour while in Australia assist in determining whether a person resides in Australia. The following factors are relevant: ● intention or purpose of presence, ● family and/or employment ties, ● maintenance and location of assets, and ● social and living arrangements. Since the Commissioner published TR 98/17, there have been many more cases that have discussed residency status of Australians leaving Australia. The resides test was considered in Iyengar v FCT 2011 ATC 10-222. In that case, the taxpayer was considered to be residing in Australia even though he had a two year work contract to work overseas and only returned to Australia twice in that time. He was in Australia for a period of 14 days and then later for a period of 10 days during that time. It was highlighted that the term ‘reside’ should be given a wide meaning and that a person does not necessarily cease to be a resident because they are physically absent. The test is whether the person has retained a continuity of association with that place. Iyengar had the required continuity of association with Australia and was considered a resident under the resides test. It was also considered that he did not establish a permanent place of abode outside Australia. Residence was also discussed in Joachim v FCT 2002 ATC 2088 ( Joachim’s case ). 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. In Pillay v FC of T 2013 ATC 10-324 ( Pillay’s case ), the taxpayer had purchased and renovated a place in Bali, Indonesia, however he was still found to be an Australian resident. He had been working overseas since 2006. He was in Australia for between six to eight weeks each year. During his visits to Australia, he would spend time at his property in Australia and visiting his children and grandchild. The taxpayer had Australian bank accounts. The taxpayer maintained a continuity of association with Australia in the relevant years despite being physically absent for significant periods. Recent case law considers the following factors relevant in determining the residency status of an individual: ● physical presence, ● nationality, ● history of residence and movements, ● habits and mode of life, ● social and living arrangements, ● frequency, regularity and duration of visits to Australia, ● family and business ties and ● maintenance of place of abode. The period of physical presence or length of time in Australia is not by itself decisive when determining whether an individual resides here. Equally important is the quality and character of an individual’s behaviour while in Australia. Family or business ties with a country are an important factor to be taken into account in determining whether or not a person has ceased to be resident in a particular country. The location of an individual's immediate family can be decisive ( Joachim’s case ). In Australia, family ties outweigh business ties where the two are in conflict ( Shand v FC of T 2003 ATC 2080). Results of the resides test In your case, you were born in Australia and are citizens of Australia. You also have foreign citizenship to facilitate your travel. You are travelling in various countries and staying in various short term accommodation for extended periods. However, it is not considered that you will be settled with your usual abode overseas. Although you will not be physically present in Australia for much of the time, this does not mean that you are no longer residents of Australia. You still have ongoing ties with Australia. You have kept Australian bank accounts and have properties in Australia. Your main personal possessions remain in Australia with few personal possessions overseas. Most of the members of your extended family live in Australia. You have rented out your properties in Australia and intend to live in one of your properties when you return to Australia. You intend to return to Australia for medical, family and other reasons. In view of the decisions arising from recent case law, the Commissioner believes that you remain a resident of Australia for taxation purposes because you have maintained a continuity of association with Australia. Therefore, you are a resident of Australia under the resides test for the 2019-20 to 2021-22 income years. The domicile test and permanent place of abode Whilst is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you a resident under the resides test), we will also include a discussion of the ‘domicile and permanent place of abode’ test. 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 to 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. You are an Australian citizen. Your domicile is Australia. 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. The following factors are considered relevant in determining a taxpayer's permanent place of abode: ● the intended and actual length of stay in the overseas 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. While your usual place of abode may be outside Australia, it is not considered that you have a permanent place of abode outside Australia. Your actions are not consistent with a person who has resolved to permanently leave Australia, and your ties and association overseas lack an enduring relationship. That is, the nature and quality of your ties overseas are not sufficient to show you have a permanent place of abode there. As found in Case 2/98 98 ATC105, Boer v FC of T 2012 ATC 10-269, Sully v FC of T 2012 ATC 10-272, Bezuidenhout v FC of T [2012] AATA 799, Pillay’s case and Case 5/2013 2013 ATC 1-054, you have not established a permanent place of abode outside Australia. As your domicile remains in Australia and the Commissioner is not satisfied that you have a permanent place of abode outside of Australia, you are considered to be a resident of Australia for income tax purposes under the domicile test. The 183 day test and the superannuation test are not relevant in your circumstances. As you are an Australian resident for taxation purposes, your Australian and overseas income is included in your assessable income in the year of receipt under subsection 6-5(2) of the ITAA 1997.

Relevant facts: You were born in Australia and have been continuous residents of Australia. | You have lived in different states of Australia. | You had long term employment in Australia until recent retirement. | You do not intend to seek further employment. | You holidayed abroad over a number of years before retirement while on paid leave. | You have never had employment outside of Australia. | Through foreign parentage, you have foreign citizenship. | You own a residential dwelling in Australia which is currently tenanted. A substantial amount of furniture, clothing and electrical appliances are currently stored in storage for your return to Australia. | You also own a small residence in Australia. This property has always been a rental property. | You don’t own any real estate outside of Australia and you don’t intend to buy any property overseas. | You have a family trust, investments, several personal accounts, industry based superfunds from employment as well as a self-managed superfund. | You are in receipt of super pension. You are not a Commonwealth superfund member. | You have substantial and close family and personal relationships in Australia. | You have long term private health insurance, which is currently suspended whilst overseas. | After retirement you had the opportunity to experience continent A and wished to travel before medical or other issues made travel difficult. You are currently holidaying for an extended period before returning to Australia soon. | You have visited several countries with multiple visits to various places in each country for differing periods. | The type of accommodation and duration of stay has varied. You have very few personal possessions with you. Apart from hotels, Airbnb and booking.com type arrangements you have stayed in several private homes for intermittent periods. Usually this is done while the owners have been away and can include looking after the owner’s pets. | You have not been responsible for any residential service charges, utility bills such as water, gas or electricity in any accommodation where you have stayed. | You do not have any personal on-going social or economic support available to you overseas. No close community links have been developed overseas and no memberships of any clubs, societies or social organisation have been established. | You have an overseas bank account. The account is used for shopping and similar expenses. All funds deposited into the account have been taken from your Australian bank accounts. You expect to return to continent A after a few months in Austraila. | All expenses, either in Australia or elsewhere have been and continue to be paid with Australian funds. | You maintain frequent social contacts with your Australian family and friends while overseas. | You use public libraries to access ‘The Australian’ newspaper where available. This helps maintain links with Australian legislation as well as investment research and community issues. | Time spent overseas will depend upon your health and other personal factors. You wish to continue your overseas adventure while you have the enthusiasm for travel and still find it relatively easy. You are considering the possibility of obtaining accommodation to use as a base for multiple trips to additional countries. No specific accommodation has been planned. | You intend to return to Australia at least once each year for various reasons. | You will stay at your own property when returning to Australia.