Private ruling: Residency and leaving Australia
Date of advice: 8 July 2016
Published: August 2016
Ruling period: Year ended 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 20XX

Ruling: Question and answer | Are you an Australian resident for income tax purposes for the period 1 July 20XX to 30 June 20BB? | Yes

Relevant facts and circumstances: You were born in Australia. You have a passport in Country Y. You departed Australia in 20XX, with the intention of living and studying in Country X for a period of two to five years, and plan on returning to Australia at the completion of your study, in 20BB. You will be living in a University college where you will be paying for your room rental, which is fully furnished by the college. The University year is divided into three terms, with breaks of six weeks in between terms and a three month break at the end of each year. At the end of each study year you will be putting your belonging into storage and will be planning on returning to Australia for end of year student holidays, which is from late June to early October each year. You also intend on returning to Australia for the Christmas break each year, which is five weeks over December to January, but apart from this you have no other set plans to travel during other periods of study leave. You returned to Australia in 20XX and left again for Country X in 20YY. You intend on returning to Australia in 20YY and will be departing again for Country X in 20YY. Upon your return to the University after each end of year break, you will be randomly allocated a different room for the study year. Whilst you expect to be overseas for more than 200 days each year, most of which will be spent in the Country X, your room at your parent's house will remain available to you at all times. You will be maintaining an Australian bank account. You expect to do some part time work for your parent's company both whilst you are in Country X and when you return home at the end of each study year, in addition to some separate part time work. The University where you will be studying in Country X has noted your Australian address as your home address. Your parent's will be paying for your university fees and travel, and you will be contributing towards the room and board in Country X. You will remain on your parent's private health insurance policy as a dependent, and you have not taken out separate private health insurance. You have taken some personal effects to Country X, and some personal effects will remain at your parent's house in Australia. You have not advised any Australian financial institutions that you will be a foreign resident. You will maintain a bank account in to cover living costs whilst you will be in Country X and apart from this you will have no other assets in Country X. You will not be lodging any foreign tax returns whilst living in Country X. You do not have a spouse. You maintain Australian friendships and plan to go camping with them in July each year. You will be playing sport and will also be training with your University in Country X. You are not currently employed by the Commonwealth of Australia. You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990 . You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976 .

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

Reasons for decision: Summary: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax 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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: • the resides test, • the domicile test, • the 183 day test, and • the superannuation 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. Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests. | Detailed Reasoning - The resides (ordinary concepts) 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'. 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. In deciding cases of residency, the courts and tribunals have noted that a person does not necessarily cease to be a resident because he or she is physically absent from a place. Instead, the test is whether the person has retained a continuity of association with a place, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation [2002] ATC 2088 ). In your case: • Your room at your parent's house will remain available to you at all times during the time you will be staying in Country X. • Some of your personal effects will remain at your parent's house in Australia. • At the end of each study year you will be putting your belongings into storage and will be planning on returning to Australia for end of year student holidays. • You also intend on returning to Australia for the Christmas break each year, which is for five weeks. • You returned to Australia in 20XX and left again for Country X in 20YY. • You intend on returning to Australia in 20YY and will be departing again for Country X in 20YY. You have retained a continuity of association with Australia, which is evidenced by your actual and future intended returned visits. Based on these facts, you are residing in Australia according to the ordinary meaning of the word. Therefore, you meet the 'resides test' and are a resident of Australia for tax purposes. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the 'resides' test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument. | 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: Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. This 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. Therefore, as you have not taken any legal steps which would have proven an intention to change your domicile to Country X, you have retained your Australian domicile. Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia. | 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 courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." 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. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; (c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayer's presence in the overseas country; and (f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia expands on factor (c) as follows: The fact that an individual has established his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent. Acquisition of a home in the overseas country would be a very relevant though not conclusive factor. On the other hand, individuals or a family group who "make do" in temporary accommodation with limited resources and facilities such as in barracks, singles' quarters, aboard ships, oil rigs, or mining towns, will be less likely to be considered to have established a permanent place of abode overseas. In your case it is considered that you have not established a permanent place of abode outside of Australia because: • You will be staying in temporary student accommodation where at the end of each year you will be putting your belongings into storage. • Upon your return to the University college after each end of year break, you will be randomly allocated a different room for the study year. • Your room at your parent's house will remain available to you at all times during the time you will be staying in Country X. Therefore, you are a resident of Australia under this test. | Detailed Reasoning - Your residency status: As you meet the resides and domicile tests of residency, you are a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936.