Private ruling: Residency
Published: November 2011
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2011

Ruling: Questions and answers: | Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: You were born and are a citizen of Australia. You have a tourist visa for country A. You are volunteering in country A at the present time. You will be in country A for 3-6 months. You are staying in accommodation provided to you by the people you are volunteering for. You intend to go to country B and country C when you finish in country A. You intend to be in country B for 2 years. You do not know how long you will be in country C for. When you arrive in country B and country C you will look for work. You will rent a room in a share house in both country B and country C. You intend to return to Australia but at this stage are unsure when you will return. You will open bank accounts in country B and country C for your salary to go into. You will return to Australia for holidays with family and friends. You have an investment property in Australia which is being rented out. You have no spouse or dependants. You are not eligible to contribute to a Commonwealth super fund.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non-resident of Australia for taxation purposes, your assessable income includes only income from an Australian source. Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purpose 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. These tests are: · the resides test · the domicile test · the 183 day test · the superannuation test The first two tests are examined in detail in Taxation Ruling IT 2650: Residency - Permanent Place of Abode outside Australia . 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests. | Detailed Reasoning - The resides 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 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. You left Australia in the 2011-12 income year. You are therefore not residing in Australia according to ordinary concepts and you are not a resident of Australia for tax purposes according to this test. | Detailed Reasoning - The domicile test: If a person has their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: There are essentially 3 types of domicile that an individual can have: · the domicile of origin; · the domicile of choice; and · the domicile of dependency. Basically, the domicile of origin of an individual is where the individual was born. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa, a working visa. Even for a substantial time such as 2 years would not be sufficient evidence of an intention to acquire a new domicile. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind. You were born in Australia. Therefore, your domicile of origin is Australia. You are not a citizen of any overseas country and therefore you retain your Australian domicile. For the period you are in country A it is considered that you are on a holiday. The Commissioner does not accept that being in country B for 2 years is sufficient evidence of acquiring a new domicile. As your domicile is Australia, you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | 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. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. An individual who establishes 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. | Detailed Reasoning - In your case:: you have gone to country A to volunteer · your accommodation is provided · you will live in a share house when you get to country B and country C · you intend to return to Australia · you have a property in Australia · you have no definite plans at this stage and no employment overseas, and · you will be in country B for 2 years. The Commissioner is not satisfied that you will establish a permanent place of abode outside Australia; therefore you are a resident under this test. As you meet the domicile test it is not necessary to consider the 183 day and superannuation tests. Your residency status You are a resident of Australia for taxation purposes and you are required to lodge a tax return and declare income derived both in and outside Australia in your returns.

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