Private ruling: Residency
Date of advice: 24 April 2018
Published: July 2018
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

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

Relevant facts and circumstances: You were born in Country X and you only have Country X citizenship and a Country X passport. You are single with no other family members or relationships in Australia. You moved to Australia with a working holiday visa. You started working for a business in Australia. The business sponsored you and you stayed in Australia with a skilled migrant 457 visa. You left Australia to undertake a world tour before coming back to Australia. Your employer has stated that you are welcome to return to work for them after your travel overseas. In total you lived in Australia continuously for more than three years. You had a lease agreement on your residence in Australia and you vacated that accommodation when you departed Australia to commence your travels. You submitted your income tax returns with an accountant which you lodged as a resident of Australia for taxation purposes. You have submitted an expression of interest to apply for an Independent Skilled Migrant Visa 189. This is a permanent residence visa. If it is granted you will return to Australia at the end of your trip. You have no exact dates of arrival in the different countries you will be visiting. Your world tour should not last more than one year and you expect to come back to Australia if your permanent residency visa is granted. Your sponsored skilled migrant visa 457 is no longer valid. Before you left Australia you held a tourist 651 visa. You have no plan to live permanently in another country. You will be travelling for one year with the intention to come back to Australia if you can. You consider Australia to be your home country. However, you have provided the postal address of your parents’ home in Country X while you are travelling. Your previous employer has expressed interest in taking you back when you return to Australia. You built a strong social network of friends and personal relationships in Australia. You have the following assets in Australia: ● bank account ● saving account ● superannuation ● shares You have the following assets in Country X: ● bank account ● saving account You are not an eligible employee in the CSS scheme or a member of the PSS.

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

Reasons for decision: Summary: Section 6 of the Income Tax Assessment Act 1936 (ITAA 1936) provides four tests to determine the residence of individuals. In summary, you will be a resident of Australia for Australian domestic tax purposes if any of the following tests is satisfied: (1) you are a resident of Australia according to ordinary concepts (according to the ordinary meaning of the word ‘resides’); (2) you are domiciled in Australia unless the Commissioner is satisfied your permanent place of abode is outside Australia; (3) you have been in Australia for more than one-half of the income year (in excess of 183 days) unless you can satisfy the Commissioner that your usual place of abode is outside Australia and that you do not intend to take up residence in Australia; or (4) you are a member of certain Commonwealth government superannuation schemes or you are a spouse or child under 16 of such an individual. The primary test for deciding your residency status is whether you reside in Australia according to the ordinary meaning of the word ‘resides’. | Detailed Reasoning - Residence according to ordinary concepts: 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'. You were living and working in Australia on a skilled migrant 457 visa. You have left Australia to travel around the world and are no longer residing in Australia and cannot be a resident under this test. | Detailed Reasoning - The domicile/permanent place of abode test: Domicile If an individual 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. There are three types of domicile that an individual can have: ● the domicile of origin; ● the domicile of choice; and ● the domicile of dependency. Your domicile of origin is generally where you were born. In order to show that you have chosen a new domicile (domicile of choice), you must be able prove an intention to make your home indefinitely in a new country. There must be both the act and the intention to select a new jurisdiction as your permanent home, for example, applying for permanent residency in another country. A domicile of dependency will normally only exist in relation to minors or individuals who are of unsound mind. You were born in Country X and you have applied for permanent residency in Australia. Your domicile of origin is Country X, however, in applying for permanent residency in Australia, you have made a choice to change that domicile to Australia. However, until you are granted permanent residency, your domicile remains in Country X. Permanent place of abode outside Australia The other component of this test rests on the Commissioner being satisfied that you have established a permanent abode outside Australia. 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. The term ‘permanent’ is not used in the sense of unending, but is used in contrast to temporary or transitory. Generally speaking, an individual who leaves Australia with an intention of returning at the end of a transitory stay overseas would remain a resident of Australia for income tax purposes. As a general proposition, an overseas stay for a duration of less than two years would be considered as being of a transitory nature. Taxation Ruling IT 2650 states the following factors are relevant in determining a person’s permanent place of abode: ● the intended and actual length of the individual’s stay in the overseas country ● any intention to return to Australia at some definite point in time or to travel to another country ● the establishment of a home outside of Australia ● the abandonment of any residence or place of abode the individual may have had in Australia ● the duration and continuity of the individual’s presence in the overseas country, and ● the durability that the individual has with a particular place in Australia. These factors, as they relate to the facts of your case, are considered below. ● You are travelling around the world and have no intention of relocating to any one place. ● Your intention is to return to Australia at the conclusion of your travel if your application for permanent residency has been approved. ● You have not established a home outside Australia. Your parents live in your domicile of origin in Country X and while you are travelling and have no fixed place of abode, you are using their address for communication purposes. ● You leased accommodation while in Australia and you vacated that accommodation when you departed Australia to commence your travels. ● You have no plan to live permanently in another country. You will be travelling for one year with the intention to come back to Australia if you can. ● Your employer has stated that you are welcome to return to work for them after your travel overseas. Your skilled migrant 457 visa has expired and you currently hold a tourist 651 visa. You have applied for permanent residency in Australia and therefore have made a choice to change your domicile. However, the outcome of your application is not yet known. You have not established a permanent place of abode outside Australia and your domicile remains in Country X until the outcome of your permanent residence application is known. | Detailed Reasoning - The 183-day test: Where you are present in Australia for 183 days during the year of income you will be a resident, 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 were present in Australia for more than half of the 2017-18 financial year and you have indicated an intention to take up permanent residence in Australia by submitting your application for permanent residency. You are a resident of Australia under this test. | Detailed Reasoning - The superannuation test: You will still be a resident of Australia if you are eligible to contribute to the Commonwealth Superannuation Scheme (CSS) or Public Service Superannuation Scheme (PSS), or you are the spouse or child under 16 of such a person. You have ever been an employee of the Commonwealth Government of Australia therefore you are not a resident under this test. | Detailed Reasoning - Residency status: As you satisfy one of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you remain a resident of Australia for income tax purposes while you are travelling.