Private ruling: Residency
Date of advice: 18 December 2017
Published: May 2018
Ruling period: Year ended 30 June 201Y | Year ended 30 June 201Z
Date scheme commenced: 1 July 201X

Ruling: Q1: Are you a resident of Australia for taxation purposes? Answer: No.

Relevant facts and circumstances: You were born in Australia and moved to Country X several years ago for work. You have lived there since this time. You determined to reside permanently in Country X several years ago when you established a company there. Your spouse was born in Country X and is a citizen of Country X. You have two surviving adult children; one was born in Australia and the other in Country X. A third child is deceased. You and your spouse live in Country X and have travelled intermittently to Australia. You and your spouse lease a home in Country X and jointly own two other properties: one in Country X which it is used exclusively as the permanent residence of your two surviving children. The other is in Australia and is used to accommodate your aging parents. You stay at this location when you visit Australia. Your spouse has never obtained Australian citizenship, and she travels to Australia on a resident return visa (subclass 155). You and your spouse have considered yourselves exclusively residents of Country X for all purposes, including tax purposes, for many years and have lodged tax returns in Country X on that basis. You are a member and past president of a sporting club in Country X. You have X Australian current recreational memberships which are rarely used. Your spouse does not have any Australian memberships. You and your spouse hold a number of bank accounts in Country X, which are used for your business and as your everyday accounts. You both also maintain Australian bank accounts for the convenience it affords in paying Australian accounts such as memberships and land and water rates. You and your spouse have spent less than 100 days in Australia for many years. The rest of your time was spent in Country X. You worked in Country X and then you established and managed a Country X incorporated company, Company 1 which pays tax as a resident of Country X. You and your spouse own Company 2, an Australian registered company. Company 2’s only asset is a majority shareholding in the Country X incorporated company Company 3, of which you and your spouse are directors. Company 3 was established in Country X as a foreign joint venture company between Company 1 and Company 2, which has a minority shareholding. More recently, you and your spouse established a new company and a trust in Australia, for asset protection and estate planning purposes. You and your spouse’s most significant asset is your indirect interest in Company 3. The company pays your salary and that of all your family members, and it is from Company 3 that all of your income and assets are derived. Company 3 is your only business and it is resident in Country X and only operates in that country. Neither you nor your spouse are eligible employees for the purposes of the Superannuation Act 1976 (Cth), nor are you children under 16 of such a person.

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

Reasons for decision: Summary: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (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. The tests are: (i) the residence according to ordinary concepts test; (ii) the domicile/permanent place of abode test; (iii) the 183 days/usual place of abode test; and (iv) the Commonwealth superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. Based on the facts you have provided, we confirm that you do not satisfy any of the tests of residency. Accordingly you are not a resident of Australia for income tax purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.