Private ruling: Income Tax - Residency
Date of advice: 17 February 2017
Published: August 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Were you a resident of Australia for taxation purposes for the 2016 income year? | A1: No.

Relevant facts and circumstances: You were born in Australia. You are a citizen of Australia. You and your family went to the Country Y in the 2016 income year for work purposes. Your spouse has a permanent employment contract in Country Y. Your spouse has a work visa to enter Country Y. You have a relevant visa to enter Country Y. You and your spouse are renting an apartment in country Y. You have purchased a car and furniture for the apartment in Country Y. You do not have any sporting or social connections with Australia. You play a team sport in Country Y. Your home in Australia is being rented out. You have an Australian bank account. Your belongings in Australia were sold or given away prior to moving to Country Y. You have made two trips back to Australia since leaving and these trips did not exceed 183 days. You do not work in Country Y. You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

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

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 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 ● 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - The resides (ordinary concepts) test: The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: (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. These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/ 17 Income tax: residency status of individuals entering Australia . It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. You and your family have gone to Country Y for work purposes. You are renting an apartment in Country Y. Your spouse has a permanent work contract in Country Y. You have returned to Australia twice since leaving for two short visits. Based on the facts above for the 2016 income year you were living and working in Country Y you were not a resident of Australia for taxation purposes as you did not maintain a continuity of association with Australia. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. Your domicile is Australia. 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. The Commissioner is satisfied that you set up a permanent place of abode outside Australia for the following reasons: ● Your family has gone to Country Y with you ● Your spouse has a permanent work position in country Y ● You rent an apartment in Country Y You were not a resident under this test. | Detailed Reasoning - The 183-day test: 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. You were not in Australia for more than 183days in the 2016 income year. You were 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 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 and your spouse are not eligible to contribute to the relevant Commonwealth super fund. You were not a resident under this test. | Detailed Reasoning - Your residency status: You were not a resident of Australia for taxation purposes for the 2016 income year.