Private ruling: Residency
Date of advice: 31 January 2020
Published: May 2019
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Q1: Were you a resident of Australia for taxation purposes for the relevant period? | A1: Yes

Relevant facts and circumstances: You were born in Australia. You are a citizen of Australia and Country Z. You are not a permanent resident of any other country. You went to Country Y in the 2015 income year for work purposes. Your contract was for an indefinite period of time. Your intention was to be in Country Y indefinitely. You had a work visa for Country Y which allowed you to remain in Country Y for as long as you were employed; the initial visa was for 2 years with the option of renewing for another 2 years. You stayed in rented accommodation which was paid for by your employer in Country Y. You shared this accommodation with 2 other employees. You had the sole use of your own bedroom and shared a bathroom, lounge room and kitchen with the other tenants. You purchased household items for the accommodation in Country Y. You purchased a vehicle in Country Y. You do not have a spouse or any dependants. You rented your house out in Australia. You returned to Australia for short visits while you were in Country Y and you were not in Australia for more than 183 days in any financial year. You returned to Australia in the 2017 income year as your life time goals changed. You are not eligible to contribute to the relevant Commonwealth superannuation funds.

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

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 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 ● 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - 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 IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia . It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. You went to Country Y in the 2015 income year for work purposes. You returned to Australia in the 2017 income year. For the relevant period you were not residing in Australia according to ordinary concepts. You were not a resident 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. 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 you were born in Australia and are a citizen of Australia. Your domicile of origin is in Australia. As your domicile remains in Australia, you will be an Australian resident unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. 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. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. 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 expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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. Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia to live overseas ceases to be an Australian resident during the absence. IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode: ● the intended and actual length of stay in the overseas country ● any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country ● the establishment of a home outside Australia ● the abandonment of any residence or place of abode in Australia ● the duration and continuity of presence in the overseas country, and ● the durability of association with a particular place in Australia. As highlighted in paragraph 25 of IT 2650, as a broad rule of thumb, a period of about two years or more would generally be regarded as a substantial period for the purposes of a taxpayer's stay in another country. It must be stressed, however, that the duration of the taxpayer's actual or intended stay out of Australia is not, of itself, conclusive and needs to be considered with all of the factors. The Commissioner is not satisfied that you had a permanent place of abode outside Australia for the following reasons: ● You went to Country Y for work purposes ● You lived in shared rented accommodation in Country Y ● You returned to Australia within 2 years of leaving You were a resident under this test for the relevant period. | Detailed Reasoning - The 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 were not in Australia for more than 183 days for the period you were in Country Y. You were not a resident under this test. | Detailed Reasoning - The superannuation test: 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. You are not eligible to contribute to the relevant Commonwealth super fund. You were not a resident under this test. | Detailed Reasoning - Your residency status: You were a resident of Australia for taxation purposes for the relevant period.