Private ruling: Residency
Date of advice: 6 September 2017
Published: December 2017
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: Month B 20XX

Ruling: Q1: Are you an Australian resident for tax purposes for the financial year ended 30 June 20XX and the financial year ending 30 June 20XX? | A1: Yes

Relevant facts and circumstances: You are an Australian citizen. On Month A 20XX you accepted a secondment to Country A. You departed Australia on Month A 20XX. You have a one year working visa for Country A. Your salary will be taxable in Country A. You are not an active member of an Australian Commonwealth Government superannuation fund. Your superannuation contributions will continue to be made to your Australian superannuation account. You separated from your partner on Month C 20XX. You have X relatively young children who will remain in Australia as your ex-partner is their primary carer. Your ex-partner is currently leasing a property in their own name and the property is not accessible to you. Since the start of your secondment in Country A, you have returned to Australia once. You do not have any formal travel bookings to Australia. You own a property in Australia with your ex-partner. There is a 12 month lease with an unrelated third party over this property starting Month D 20XX. Under company policy, you will be provided with assistance for housing in Country A whilst on secondment. On Month E 20XX, you entered into a one year lease for a property in Country A which is available for your exclusive use. You were required to purchase all the kitchen equipment, bedding and cleaning equipment for the property as it was only partly furnished. You have ceased memberships of all clubs, associations and professional organisations in Australia. You have formed friendships in Country A and have been spending your free time bike riding and going on day trips with your new friends to explore the country. You own a bicycle in Country A. You had a meeting with the Australian Electoral Commission before your departure and de-registered as a voter. As such your name was removed from the Australian electoral roll. You have sold most of your personal belongings. Some are kept in a storage unit in Australia. You own a car that is currently stored at your friend’s house. You also own another car which is currently used by your ex-partner. You own a Country A bank account into which you transfer a portion of your salary. You have three Australian bank accounts, an Australian credit card and an Australian home loan. You have Australian shares held in your name. You have maintained Australian Private Health Insurance because your ex-partner and children are included in the policy. You were advised by the private health insurance company that there was no financial advantage to be gained if you removed your name from the policy. You have informed Medicare Australia of your departure to Country A.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 6-1 and | Income Tax Assessment Act 1997 subsection 995-1(1) | Domicile Act 1982 section 10.

Reasons for decision: Summary: You are an Australian resident for tax purposes for the financial year ended 30 June 20XX and the financial year ending 30 June 20XX. | Detailed Reasoning - Detailed reasoning: 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 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 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. 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 are not residing in Australia according to the ordinary meaning of the word because you have been living in Country A since Month A 20XX. | Detailed Reasoning - The domicile test: Section 10 of the Domicile Act 1982 provides that “the intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country. In order to be deemed an Australian resident, the Commissioner has to be satisfied that your “permanent place of abode” is not outside Australia. “Place of abode” refers to your dwelling place or the physical surroundings in which you live ( R v Hammond (1852) 117 E.R. 1477 at p. 1488). Paragraph 23 of Taxation Ruling IT 2650 Income tax: residency- permanent place of abode outside Australia (Taxation Ruling IT 2650) emphasises that the following factors are relevant in determining whether a taxpayer has established a permanent place of abode: (a) the intended and actual length of the individual's stay in the overseas country; (b) any intention to stay in the overseas country temporarily and then move on to another country or to return to Australia at some definite point in time; (c) the establishment of a home outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence. (e) the duration and continuity of the taxpayer’s presence in the overseas country; and (f) the durability of association that the individual maintains with a particular place in Australia. In applying factor (a) to your circumstances, the intended length of your stay in Country A is two years. The actual length of your stay is not able to be determined at this stage since you have not returned. As a broad rule of thumb, a period of about two years or more would generally be regarded by this Office as a substantial period for the purposes of a taxpayer's stay in another country. This factor points to you being a non-resident for tax purposes. It must be stressed, however, that the duration of your actual or intended stay overseas is not, of itself, conclusive and needs to be considered with all of the factors listed in the previous paragraph. In applying factor (b), you will be returning to Australia once the secondment concludes at the end of two years or at the end of your one year working visa. In the absence of a guaranteed extension of your secondment or your visa, you will be returning to Australia at a definite point in time of either one or two years from your departure. This factor points to you being a resident of Australia for tax purposes. In applying factor (c), you have a one year lease on a property in Country A. You have also bought some equipment for the home and bedding as it was partly furnished. Since you are not living in temporary accommodation with limited resources but are living in a home, this factor points to you being a non-resident of Australia for tax purposes. However while this is a relevant factor, it is not conclusive as outlined by paragraph 28 of Taxation Ruling IT 2650. In applying factor (d), you do not have a place of abode in Australia because your ex-partner is renting a property in their name which is not accessible to you. Although you own a property with your ex-partner, it is currently rented out to an unrelated third party. You also intend to stay with family and friends during visits to Australia. This factor points to you being a non-resident of Australia for tax purposes. In applying factor (e), you have been living in Country A for 10 months. You have also returned to Australia once in that timeframe. You have not been overseas for a long duration and continuity in your overseas stay has been broken. This factor points to you being an Australian tax resident. In applying factor (f), your association to Australia include your Australian superannuation account, your two relatively young children, an investment property, some personal belongings in a storage unit, ownership of two motor vehicles, three Australian bank accounts, an Australian credit card, an Australian home loan, ownership of Australian shares and Australian private health insurance. These indicate that you have a fairly strong association with Australia which in turn point to you being an Australian tax resident. Paragraph 24 of Taxation Ruling IT 2650 states that no single factor will be decisive but that greater weight should be given to factors (c), (e) and (f). Additionally, the case of ZKBN and Commissioner of Taxation [2013] AATA 604 provides authority that retaining ties with Australia and having an intention to return to Australia greatly point towards Australian tax residency. Three of the factors point towards you being a non-resident of Australia for tax purposes and the other three point towards you being an Australian resident for tax purposes. However, out of the factors which carry the most weight, namely factors (c), (e) and (f), only one- factor (c), points towards you being a non-resident of Australia. Additionally, you have retained ties with Australia as discussed in factor (f) and you also have an intention to return to Australia once your visa expires and/or your secondment is concluded. Therefore, you are deemed to be an Australian resident for tax purposes in accordance with Taxation Ruling IT 2650 and the case of ZKBN and Commissioner of Taxation [2013] AATA 604.