Private ruling: Residency
Published: January 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Were you a resident of Australia for taxation purposes for the period you were in a foreign country? | No.

Relevant facts and circumstances: You were born in and are a citizen of a foreign country. You have a foreign country passport. You were granted permanent residency in Australia. You departed Australia. You have been transferred from a company in Australia to a company in a foreign country, a separate company. You were required to resign from the Australian company before taking up you current position with the company in a foreign country. You longer receive income from Australia. No family accompanied you to a foreign country. You are single with no dependents or partner. You did not return to Australia at any time during your time in a foreign country. You do not own a dwelling in Australia. Prior to leaving Australia you lived in rented accommodation. You do not have a return airline ticket. You went to a foreign country on a one way ticket paid for by your employer. In a foreign country your employer did not arrange accommodation for you. You lived in rented accommodation. Your assets in Australia are: • 3 bank accounts • household effects. You took your household effects with you to a foreign country but put them in storage as the accommodation you rented was furnished. Your assets in a foreign country are: • a 1 bedroom flat • a bank account • investments Regarding your employment overseas is permanent for a long as there is a role for you in the company. You have provided a copy of your employment contract. You have no social or sporting connections with Australia. You have no social or sporting connections with a foreign country. You have never been a member of a Commonwealth of Australia employee for superannuation purposes. You have advised financial institutions of your relocation to a foreign country and provide them with your address there. You have not advised Medicare to have your name removed from their records. When completing the Australian Immigration Outgoing passenger card you stated employment as the reason for going overseas.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 (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 first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides (ordinary concepts) 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'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In your case, you will not be residing in Australia for the purposes of the resides test because your ties to a foreign country are much more substantial than are your ties to Australia; specifically you: • are a citizen of a foreign country which is your country of birth • have returned to a foreign country to live and work • own a dwelling in a foreign country • have numerous investments in a foreign country • have no family in Australia Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you did not maintain a continuity of association with Australia for the relevant period. | Detailed Reasoning - The domicile and permanent place of abode test: 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 a foreign country and did not become a citizen of Australia when you were living here. However, as you obtained permanent residency status while in Australia, your domicile of choice became Australia. As you have departed Australia to live and work in a foreign country, you have reverted to your domicile of origin. | 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. You own a dwelling in a foreign country but rented while in Australia. The Commissioner is satisfied you have a permanent place of abode outside of Australia. You are not a resident of Australia under the 'domicile and permanent place of abode' test of residency. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You have not been present in Australia for a total period of more than half of the year of income. Your usual place of abode is in a foreign country. You are not a resident of Australia under the 183-day test. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (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 have never been a member of a Commonwealth of Australia employee for superannuation purposes. Further, you have no spouse and are more than 16 years of age. You are not a resident of Australia under the superannuation test. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.