Private ruling: Residency
Date of advice: 3 March 2017
Published: March 2018
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Question and answer: | Are you a resident of Australia for income tax purposes for the period you were overseas? | Yes

Relevant facts and circumstances: You are an Australian Citizen. You accepted a role overseas and left Australia with your child. The employer arranged residency for you and your child with no restrictions. You arranged rental accommodation for yourself and child. The apartment was unfurnished so you purchased sofa bed, double bed, single bed, dining table, wardrobes and book shelves all cutlery and bedding and cooking utensils. Your child went to school and you paid the fees required. Salary was paid monthly into an overseas bank account. All medical and hospital and dental costs were covered by the employer. You were unable to obtain a permanent contract, your contract was based on a 12 month period - no longer term options exist. In the second 12 month contract you received a significant promotion. During the period both you and your child had a period in hospitals for surgery. During the period there you were an active member of your new community You visited Australia with your child during school holidays for brief periods - the purpose was for your child to visit relatives and their other parent. No home nor storage was maintained in Australia Before leaving Australia, you were renting a property with your estranged spouse, after you left Australia they remained in the property. All but one Australian Bank Account was closed, that account was one opened with your estranged spouse who was using it for their income and expenses. There was no intention to return to Australia upon acceptance of your contract. You informed the Australian Electoral Commission and Medicare that you had left Australia. All professional memberships were maintained as they are also a professional network. An opportunity arose in Australia; you were offered the position and returned to Australia to to take up this position. As the opportunity was in another State, you do not return to your previous residence. You and your child were overseas for approximately 18 months. Neither you or your spouse are Commonwealth of Australia employees.

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

Reasons for decision: Summary: Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 6(1) of the ITAA 1936 defines the terms ‘resident’ and ‘resident of Australia’ in respect of individuals to mean: (a) a person who resides in Australia and includes a person: (i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside of Australia; (ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia; or (iii) who is an eligible employee for the purposes of the Superannuation Act 1976 or is the spouse or a child under 16 years of age of such a person. The above definition provides four tests to assist in determining whether you are a resident of Australia for income tax purposes. The four tests comprise: 1. residence according to ordinary concepts (primary test); 2. domicile and permanent place of abode test (first statutory test); 3. 183 day rule (second statutory test); and 4. Commonwealth superannuation test (third statutory test). Where one or more of the above tests is satisfied, an individual will be an Australian resident for tax purposes. Taxation Ruling IT 2650 also provides guidelines for determining whether individuals who leave Australia temporarily to live overseas on temporary work assignments cease to be Australian residents for income tax purposes during their overseas stay. IT 2650 focuses on the first two tests referred to above being tests most widely applicable to persons who leave Australia temporarily and are not actually living in Australia during the income year. The four tests will be applied to your circumstance. | Detailed Reasoning - 1. Residence according to ordinary concepts test: The ordinary meaning of the word ‘reside’, according to the Shorter Oxford English Dictionary, 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 accepted a role and left Australia to work. Your child accompanied you with your estranged spouse remaining in Australia. You arranged rental accommodation overseas and did not own a home in Australia. Your spouse remained in rental accommodation in Australia. During the period you are working overseas, you are not living in Australia, and therefore you are not considered to be residing in Australia according to ordinary concepts. | Detailed Reasoning - 2. Domicile and permanent place of abode test: A person will be a resident of Australia if he or she has an Australian domicile, unless the Commissioner of Taxation can be satisfied that the person has established a permanent place of abode outside of Australia. Domicile Taxation Ruling IT 2650 states at paragraph 21 that persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. 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 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. You are a citizen of Australia and as you returned to Australia within two years you have not acquired a domicile of choice outside Australia. 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’, or an abode in which a person intends to live for the rest of their life. A person living overseas who intends to return to Australia in the foreseeable future is not prevented in the meantime from setting up a permanent place of abode elsewhere. Paragraph 23 of IT 2650 sets out the following factors which help determine a taxpayer’s permanent place of abode. The weight given to each factor will vary depending on the circumstances of each case and no single factor is conclusive. 1. The intended and actual length of the taxpayer’s stay in the overseas country. You advised that you left Australia. You had a 12 month contract as a longer period could not be negotiated. There was no intention to return to Australia. Your employer arranged for residency for you and your child. You received an offer of employment in Australia and returned to Australia to take up this position. You were overseas for approximately 18 months. 2. 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. 3. Your employer arranged residency for you and your child with no restrictions. 4. Whether the taxpayer has established a home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia. You arranged rental accommodation for yourself and your child, you furnished this accommodation. 5. Whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence. 6. You lived in rented accommodation in Australia. Your estranged spouse continued to live in this accommodation when you went overseas. 7. The duration and continuity of the taxpayer’s presence in the overseas country. You were overseas for approximately 18 months. During this period, you returned to Australia on a number of occasions for brief periods. 8. The durability of association that the person has with a particular place in Australia, that is, 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. 9. You closed all but one bank account in Australia and informed the relevant departments of your departure from Australia. Based on the above facts, you did not establish a permanent place of abode overseas. Therefore as your domicile is Australia you are a resident of Australia for tax purposes under this test. | Detailed Reasoning - 3. The 183-day test: Under the 183-day test, a person will be considered an Australian resident if they are present in Australia for 183 days or more during the year of income 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. For the period within the two income years you were overseas was more than 183 days in each of the years. Accordingly, you are not a resident under this test. | Detailed Reasoning - 4. The superannuation test: Under the superannuation test, a person will be considered an Australian resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Neither you nor your spouse are members of the relevant Superannuation Schemes. In addition, you are over 16 years of age. Accordingly, you are not an Australian resident under this test. | Detailed Reasoning - Conclusion: You are an Australian resident for income tax purposes for the period you were overseas.