Private ruling: Residence
Published: March 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | No. | Are you required to declare your income derived in Country Z in your Australian tax return? | No.

Relevant facts and circumstances: You were born in Country Y and you are a citizen of Country Y. You have permanent residency of Australia. You have left Australia to work in Country Z. You have a work visa for country Z. The work visa does not allow you to stay permanently in Country Z. You do not intend on being in Country Z permanently. Your work contract is for at least X years and you intend on returning to Australia at the end of the contract. You have been provided accommodation as part of your work contract which is self-contained and for your sole use. You own a house in Country Y which you pay the mortgage on each month and you have a bank account in Country Y for the purposes of paying the mortgage. You were granted a special visa to enter Australia. You rent a home with your adult children and family friends in Australia and you intend on returning to this home when your contract ends. You share the expenses associated with the property in Australia with your adult children and the friends sharing the property. You do not have a spouse. Your adult children receive Centrelink payments and are studying. You have an adult child who remains in Country Y. Your other children remain in Australia for the duration of your work contract in Country Z. You returned to Australia over the Christmas break to see your family in Australia. You will return to Australia during your holidays to see your adult children and these trips will not exceed 183 days in any financial year. You are not eligible to contribute to the relevant 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 have gone to Country Z for work purposes for X years. You live in employer provided accommodation in Country Z. You will return to Australia for visits with your adult children, these visits will not exceed 183 days in any financial year. Your adult children remain in Australia in the rented property you share with family friends. Based on the facts above you are not residing in Australia according to ordinary concepts. | 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. 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. 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. Your domicile of origin is Country Y and your domicile of choice is Australia as you have been granted permanent residency. The Commissioner is satisfied that you have a permanent place of abode outside Australia for the following reasons: • You will be working in Country Z for X years • You will live in employer provided accommodation that is self-contained and for your sole use You are 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 will not be in Australia for more than 183 days in a 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 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 are not eligible to contribute to the relevant Commonwealth superannuation fund. You are not a resident under this test. | Detailed Reasoning - Your residency status: You are not a resident of Australia for taxation purposes. As a non-resident of Australia for taxation purposes you are not required to declare the income you derive while working in Country Z in your Australian tax return.