Private ruling: Residency
Published: June 2015
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: The scheme has commenced

Ruling: Questions and answers | Are you a resident of Australia for taxation purposes while you were domiciled in Country A? | No

Relevant facts and circumstances: You are a citizen of Australia. You were born in Australia. You left Australia in March 20XX and commenced work in Country A. You were employed by your employer. It was your intention to complete the 2 year contract and to consider a further period of work in Country A. Your family accompanied you to Country A. You were provided with employer supplied accommodation when you initially commenced work in Country A. While working in Country A you did not return to Australia for any purpose. You subsequently moved into accommodation that you had to pay rent on. Due to changed conditions your contract was varied and ultimately you resigned from the company. You returned to Australia after ceasing your employment in Country A. You listed your residential property for sale but due to it not being sold you decided to make it available for rent. The property was listed for sale for the entire period that the property was being rented. You resumed living there upon your return. You sold assets such as your motor vehicle when you left Australia. You kept bank accounts in Australia. You opened bank accounts in Country A. You cancelled your Electoral Roll registration and your private health insurance when you moved overseas. You did not maintain any social or sporting connections with Australia when you were overseas. You had strong social and sporting connections in Country A. Neither you nor your spouse are or have been Commonwealth Government of Australia employees at any time.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1). | Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision: Summary: An Australian resident for taxation purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) 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' are defined in subsection 6(1) of the ITAA 1936. The definition gives us a series of tests which assist in determining whether a person is a resident of Australia. These tests are: 1. residence according to ordinary concepts; 2. the domicile/permanent place of abode test; 3. the 183 day/usual place of abode test; or 4. the Commonwealth superannuation fund test. 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 you do not reside in Australia according to ordinary concepts, you may still be a resident of Australia for tax purposes if you meet the conditions of any one of the other three tests. We refer to Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia which provides guidelines for determining whether individuals who leave Australia to live overseas cease to be Australian residents for income tax purposes during their overseas stay. | Detailed Reasoning - 1. Residency according to 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 were not residing in Australia for the purposes of the resides test for the following reasons: • You moved to Country A to take up work with your employer on a two year contract with the possibility of extending this. • Your spouse accompanied you to Country A. • You intended to live in Country A on a permanent/long term basis. • You only resigned from the company due to uncertainty as to its' long term viability. • You placed your Australian assets on the market in particular your house, sold your motor vehicle and other assets before leaving • While your property was advertised for sale, you rented it out on three month tenancies. • You did not return to Australia at any time when you were working in Country A. | Detailed Reasoning - 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, the 183 day test and superannuation fund test. | Detailed Reasoning - 2. The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. You intended to remain in Country A for a period of two years and was considering extending that time when the contract ran out. You sold or attempted to sell your assets including your principle Australian home. It was only when this was not possible did you decide to rent it out instead. You have not been granted permanent residency in Country A nor have you changed citizenship. While you were in Country A you rented out your main residence property for periods of three months tenure as you did not want to enter into longer term contracts in case you chose to return to Australia. You have not shown that you have changed your domicile from Australia to Country A, particularly as you have only made your property available for rent for three month contract periods. | Detailed Reasoning - 3. The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You were in Australia for less than 183 days in the income year. | Detailed Reasoning - 4.Superannuation test: You have stated that your spouse and yourself are not and have not been employees of the Commonwealth of Australia. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you are resident of Australia as you have not shown that your domicile has changed from Australia to Country A.