Private ruling: Residency
Date of advice: 11 December 2018
Published: April 2019
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2018

Ruling: Q1: Are you an Australia resident for taxation purposes? | A1: No

Relevant facts and circumstances: You were born in Australia are an Australian citizen. You are currently living overseas, on a Multi-entry Diplomatic Permit. Your spouse was posted overseas by their employer. Your spouse’s posting is for an intended duration of three and a half years. You will likely be returning to Australia at the end of your spouse’s posting. You are currently on extended leave without pay from your Australian job. You have maintained your Australian private health insurance. You are currently working in the overseas country on a short-term contract, paid in the local currency. You and your spouse are not members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS). Your overseas accommodation is provided by your spouse’s employer. Your house in Australia is currently rented out to an unrelated party. You maintain bank accounts in Australia and a mortgage on your house. Both your and your spouse’s extended family are in Australia. You do not have children. You plan to visit your Australian relatives once a year.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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: ● the resides test, ● the domicile (and permanent place of abode) test, ● the 183 day test, and ● the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. The Commissioner may make reference to the following factors in determining whether a taxpayer is a resident under the ‘resides’ test: ● Physical presence in Australia ● Nationality ● History of residence and movements ● Habits and ‘mode of life’ ● Frequency, regularity and duration of visits to Australia ● Purpose of visits to or absences from Australia ● Family and business ties to different countries ● Maintenance of place of abode Based on your circumstances, in particular: ● The length of time you will be spending overseas, being three and a half years; ● You have rented out your house in Australia and have not maintained an abode in Australia; ● You are living in accommodation provided as part of your spouse’s posting by their employer; ● You only plan to return to Australia for one visit per year to spend time with your and your spouse’s respective families. It is therefore considered that you do not meet the resides test and are not an Australian resident under the resides 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. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case, in the period before you relocated overseas, you had an Australian domicile because of your Australian citizenship. Since that time, you have been living overseas using a Multi-entry Diplomatic Permit which is not the same as legally changing your domicile. Consequently, you have not legally changed your domicile to the overseas country and have retained your Australian domicile. | Detailed Reasoning - Permanent place of abode: 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. In your case, you will be living overseas for X years and have established a permanent place of abode in that country. You only plan on returning to Australia during this period to visit family. It is accepted you’re your permanent place of abode will remain overseas during these visits. Consequently, the Commissioner is satisfied that your permanent place of abode is outside Australia and you are not any Australian resident under the domicile test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are 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. The Commissioner is satisfied your permanent place of abode is outside of Australia during the the time of your spouse’s deployment overseas, therefore you are not an Australian resident under the 183-day test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You and your spouse are not members of the relevant superannuation schemes and you are not an Australian resident under the superannuation test. | Detailed Reasoning - Your residency status: You do not meet any of the residency tests and you will therefore not be an Australian resident while you are living overseas for the period of your spouse’s deployment.