Private ruling: Residency
Date of advice: 27 February 2018
Published: June 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021
Date scheme commenced: 1 July 2016

Ruling: Question and answer | Are you a resident of Australia for taxation purposes while you are living in country A? | No.

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You are a professional in your field. You are single and have no dependants. You enter events all over the world. You moved to country A to be closer to your coach for daily training, mentoring and to be positioned closer in the world to the cities where all the events are held. You entered Country A on a non-immigrant visa which does not allow you to stay there permanently. You will remain in country A and continue to for as long as you are physically able to. You intend returning to Australia one day. You rent a one bedroom residence in Country A and have your own transport. Most of your personal effects remain in Australia. Your assets in Australia include an investment property, motor vehicle and bank accounts. You lived with your parents in Australia prior to departing for Country A. You receive income from prize winnings, endorsements and sponsorships which are mostly paid in Australian dollars into your Australian bank account. You receive income from your investment property in Australia. You return to Australia about four times per year and stay on average 3-4 weeks each time. You continue to pay Medicare and private health insurance. You have not been removed from the electoral role. You have not advised financial institutions or Australian companies with whom you have investments that you are a foreign resident. You are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1) Anti-avoidance rules | The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the low risk PART IVA list as specified in ORCLA.

Reasons for decision: Summary: 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 (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' and 'permanent place of abode' test ● the 183 day test; and ● the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word ‘reside’. As the word ‘reside’ is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd 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'. 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 with Australia compared to the foreign country concerned; and (viii)Maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35): Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. (i) Physical presence in Australia A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. 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. Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62): Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1. You went to country A to live indefinitely in #. You make trips back to Australia approximately 4 times per year. You live in Country A to position you close to your coach for daily training and to be closer to competition events around the world. You live in rental accommodation while you are living in Country A. Based on the facts above your behaviour in the Country A reflects a degree of continuity, routine and habit that is consistent with residing in Country A. You are not a resident under this test. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and the superannuation fund tests. | Detailed Reasoning - Domicile and permanent place of abode: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case you were born in Australia and are a citizen here. Your domicile of origin is in Australia. As your domicile remains in Australia, you will be an Australia resident unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - 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'. It does not mean an abode in which you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. It is clear from the case law that a person’s permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. 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 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. IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode: ● the intended and actual length of stay in the overseas country ● any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another 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. The Commissioner considers that you have set up a permanent place of abode outside Australia for the following reasons: ● You will continue to live in Country A indefinitely. ● You intend to return to Australia when you cannot physically compete professionally anymore. ● You have and will be living in Country A for over 2 years. Applying the facts of your situation to the above criteria, you have a permanent place of abode in Thailand. | Detailed Reasoning - The 183-day test: Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that: ● their usual place of abode is outside Australia ● they have no intention to take up residence in Australia The term ‘usual place of abode’ is not the same as ‘permanent place of abode’. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country. You have not been (and do not intend to be) in Australia for more than 183 days during the period you were/are in Country A. You were/will not be, a resident under this test. | Detailed Reasoning - The superannuation test: This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age). A person is a resident under this test if they are: ● a member of the superannuation scheme established by deed under the Superannuation Act 1990 ; or ● an eligible employee for the purposes of the Superannuation Act 1976 ; or ● the spouse, or a child under 16, of a person covered by either of the above. You have not been employed by the Commonwealth government. You do not meet any of the other requirements of this test and you are not a resident under the superannuation test. | Summary: For the period you are living in Country A you are not a resident of Australia for taxation purposes.