Private ruling: Australian residency for taxation purposes
Published: August 2013
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 January 2014

Ruling: Question and Answer | Are you an Australian resident for taxation purposes? | No

Relevant facts and circumstances: You were born in Country X and moved to Australia when you were a child You and your family moved to Country Y over 10 years ago You have been employed by Employer X since 2002. You took up permanent residency in Country Y. (After x years of continual residence visitors with employment may be offered permanent residence after meeting certain criteria). You rented out your home in Australia when you left and eventually sold the property You took all of your belongings with you to Country Y. Prior to moving to Country Y you had only lived in Australia (after moving to Australia as a child). You intend to remain working for Employer X until you retire. You have children. Your spouse and children are moving back to Australia so your children can attend school in Australia. Your spouse and children will live in a house that you will purchase in Australia. Your spouse will remain in Australia until your children finish their schooling, at which time they will rejoin you in Country Y. You will continue to live and work in Country Y and will only return to Australia during your holidays to visit your family. You intend to purchase a unit in Country Y to live in. You own an investment property in Australia.

Relevant legislative provisions: Section 6-5 of the Income Tax Assessment Act 1997 | Section 6(1) of the Income Tax Assessment Act 1936 | Reasons for decision | 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. | 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. | (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." | You lived in Australia until xxxx when you and your family moved to Country Y. You will be returning to Australia during your holidays to visit your family. | (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. | You are an Australian Citizen. | (iii) History of residence | You have lived your entire adult life in Australia. | (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. | "Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia." (TR 98/17). | You have been living and working Country Y for the past xx years with your family. You have established your life in Country Y, you have joined a number of sporting clubs in Country Y. | (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 a 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. | You were living in Australia until you left in xxxx. | You intend to return to Australia during your annual leave each year to visit your family. | (vi) Purpose of visits to or absences from Australia | You intend to return to Australia to visit your spouse and children. When you left you indented to leave indefinitely, when your children finish schooling your wife will rejoin you in Australia. | (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. | Family | Your family were living with you in Country Y, they are now returning to Australia so your children can attend school. | Business or economic | You have full time employment in Country Y and are about to purchase a unit to live in. | Assets | · You own an investment property in Australia which you purchased after you left, | · You intend on purchasing a house in Australia for your family to live in, | · You are about to purchase a unit in Country Y | (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. | When you left Australia you took all of your belongings with you and rented out your family home, you later sold the property. | You purchased an investment property in Australia. You also intend to purchase a property for your family to live in. | Summary | As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Although you continued to have ties with Australia after you left in xxxx the Commissioner is satisfied that you ceased to be a resident of Australia. | When your family returns to Australia the connection you have is not enough to establish that you became a resident of Australia. | Specifically: | · When you left Australia in xxx you did so with no intention to return at any specific time in the future, | · You have a full time employment contract in Country Y, | · You intend to purchase a unit to live in while your family is in Australia. | · Your only new connection with Australia is that your family will now be living there so your children can attend school | · Your spouse will return to Country Y to live with you once your children finish school. | Based on a consideration of all of the factors outlined above you are a non resident of Australia according to the resides (ordinary concepts) test for the period covered in the ruling. | You did not maintain a continuity of association with Australia from when you moved to Country Y and became a non resident and the Commissioner is satisfied that although your family will move back so that your children can attend school, you have established your life in Country Y and this will not change when your family moves. This decision is further supported by the fact that once your children have finished their schooling your spouse will return to be with you in Country Y. | 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, 183 day test and the superannuation fund test. | Domicile and permanent place of abode | If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | IT 2650 states that: | Persons leaving Australia temporarily would generally 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 e.g., 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. | Application to the your circumstances | As you are an Australia citizen, your domicile would therefore be Australia. However, as you have taken up permanent residency in Country Y the Commissioner is satisfied that your domicile of choice is now in Country Y. | You are a not an Australian resident under the Domicile test. | 183 day test | Where a person is present in Australia for 183 days during the year of income the person will be a resident, 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. | You will not be in Australia for a period of 183 days during the relevant income years this test is not relevant to your circumstances. | Superannuation fund tests | An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the 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. | Neither you nor your spouses are eligible to contribute to the PSS or CSS, the superannuation test does not apply to your circumstances. | Conclusion | You are not a resident of Australia under any of the tests of residency.