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

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: Your country of origin is Australia and you are an Australian citizen. You first departed Australia to go to an overseas country to work as a volunteer. Prior to leaving Australia, you lived with your sibling. You have been back and forth a number of times for the past several years but have spent long periods of time in the overseas country. When you were in Australia in a previous year, your sibling fell ill and passed away. You are retired from the workforce. When you are in the overseas country you live in accommodation provided for you by the volunteer organisation. You have adult children in Australia and you stay with one of your children when you return to Australia. You purchased a house in the overseas country and you intend to sell this house when you return to Australia. Your other assets in the overseas country include cash and a bank account. Your assets in Australia include investments and a couple of allocated pensions. You intend to return to Australia permanently and purchase a house.

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

Reasons for decision: Detailed Reasoning - Residency: 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | 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 Taxation Ruling TR 98/17 residency status of individuals who enter Australia , and Taxation Ruling IT 2650 residency status of individuals who temporarily live outside Australia. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - (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 relation to this the AAT has stated that: "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." In the financial year, you have been in Australia for a small number of days. You have been living in the overseas country for the rest of the time and intend to return to Australia in the next twelve months. | Detailed Reasoning - (ii) Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. Your country of origin is Australia and you are an Australian Citizen. | Detailed Reasoning - (iii) History of residence: Prior to moving to the overseas country, you lived with your sibling in Australia. You live in accommodation in the overseas country which is provided by the volunteer organisation. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. You are in the overseas country as a volunteer and you also live in accommodation provided for by the volunteer organisation. You have travelled back to Australia on a number of occasions where you stay with your adult child. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia. Since leaving Australia to go to the overseas country, you have been back to Australia on a number of occasions. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You have returned to Australia and stay with your child over the past several years and also for a period of time when your sibling was unwell and passed away. | Detailed Reasoning - (vii) Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: You do not have any family with you overseas. Your adult children live in Australia and you stay with one of them when you return to Australia. | Detailed Reasoning - Business or economic: Assets in Australia · Investments and allocated pensions. Assets in the overseas country · cash, bank account and a house | Detailed Reasoning - (viii) Maintenance of Place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You do not own a home in Australia, but you do intend to purchase a house when you return to live here permanently. While you are in the overseas country, you live in accommodation provided by the organisation that you have volunteered with. | Detailed Reasoning - Summary - resides test: You have retained a continuity of association with Australia due to the following factors: · You have family in Australia and you return to Australia on numerous occasions and you stay with your adult child when you return here · Your country of origin is Australia and you are an Australian citizen · You intend to move back to Australia permanently. In consideration of the factors outlined above, you are residing in Australia according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Other residency tests: As you have passed the resides test it is not necessary to cover the other three residency tests, being the domicile and permanent place of abode test, the 183 day test, and superannuation fund test. | Detailed Reasoning - Conclusion - your residency status: Based on the facts, we have determined that you are a resident of Australia for tax purposes.