Private ruling: Residency
Date of advice: 17 August 2015
Published: August 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Were you a resident of Australia for tax purposes while you were working overseas? | No.

Relevant facts and circumstances: You are an Australian citizen. In June 20XX, you relocated to a foreign country to take up an employment contract. You took leave without pay from your Australian employer in order to take up the position. Your intention was to live and work in the foreign country for a minimum of two years subject to an extension of your leave without pay. To protect yourself financially, you negotiated an employment contract for a period of 12 months with an option to extend for at least a further 12 months. It eventuated that you were not granted an extension to your leave without pay and you returned to Australia in June 20XY. Your spouse and child accompanied you to the foreign country. You and your family rented a house under a lease agreement while you were in the foreign country. You established accounts for utilities, telephone, internet and cable television in your name. You opened bank accounts with a bank in the foreign country into which your salary was paid. You purchased a motor vehicle in the foreign country and sold it prior to your departure. You and your spouse obtained drivers licences in the foreign country. Your child attended school in the foreign country. You were considered a tax resident of the foreign country and tax was withheld from your salary. Your house in Australia was rented out through an agent while you were overseas. Your furniture was either sold or stored with a relative. You maintained a bank account in Australia in order to pay your mortgage and other bills associated with the house. You did not make a return visit to Australia prior to your permanent departure from the country. You advised the Australian Electoral Commission, Centrelink and your Bank that you were going overseas. You arranged for your private health insurance to be suspended while you were overseas. You are not a member of the CSS or PSS. Your spouse has never worked for the Australian Commonwealth government.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: 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 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: • the resides test, • the domicile test, • the 183 day test, and • the superannuation 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 an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. The totality of the taxpayer's factual circumstances needs to be taken into account in arriving at a decision. In Koitaki Para Rubber Estates Limited v Commissioner of Taxation [1941] HCA 13; 64 CLR 241, it was stated (at 249): The place of residence of an individual is determined, not by the situation of some business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settled or usual abode. If he maintains a home or homes he resides in the locality or localities where it or they are situate, but he may also reside where he habitually lives even if this is in hotels or on a yacht or some other place of abode: In your case, there are various factors that indicate that were residing outside Australia during the relevant period, specifically: • you left Australia to take up an employment contract in a foreign country for an intended minimum period of two years; • your spouse and child accompanied you overseas; • you leased your own accommodation in the foreign country; • you purchased a motor vehicle in the foreign country; • you obtained a drivers licence, opened bank accounts and established accounts for utilities, telephone, internet and cable television; • your child attended school in the foreign country; • you rented out your Australian residence during your absence; and • you did not make a return visit to Australia while you were working overseas. Although you spent slightly less than a year in the foreign country, it is evident that during that period you and your family were carrying on your day to day lives in the foreign country. Consequently, it is considered that you were not residing in Australia while you were living and working in the foreign country. Therefore, you were not a resident of Australia under this test. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. You had an Australian domicile and relocated to a foreign country for a period of time. There is no evidence to suggest that you changed your legal domicile at that time. Therefore, your domicile was still Australia during the relevant period. | Detailed Reasoning - Permanent place of abode: It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. The Commissioner's view on what constitutes a permanent place of abode is contained in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650). Clearly, the longer an individual stays in any one particular place, the more permanent in nature is likely to be the stay in that place of abode. An individual's intention regarding the duration of the overseas stay and the length of the actual stay are significant factors in deciding whether they have set up a permanent place of abode. A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. In your case, as previously mentioned, you relocated to a foreign country with your family and established a residence in that country. Based on the information provided, the Commissioner is satisfied that your permanent place of abode was outside Australia during the relevant period. Therefore, you were not a resident of Australia under this test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year, unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. You were not a resident under this test as you did not spend more than 183 days in Australia while you were based overseas. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse contribute to superannuation funds for Commonwealth government employees established under the Superannuation Act 1976 or Superannuation Act 1990 . You were not a resident under this test as neither you nor your spouse contributed to funds established under the above acts. | Summary: As you did not meet any of the above tests of residency, you were not a resident of Australia for tax purposes during the relevant period until you returned to Australia.