Private ruling: Residency
Published: October 2013
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2011

Ruling: Question and answers: | 1. Are you a resident of Australia for income tax purposes? | Yes. | 2. Are you required to lodge an income tax return for the income years that you will be overseas? | Yes.


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

Reasons for decision: Detailed Reasoning - Residency: 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 (ordinary concepts 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | 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 Taxation Ruling TR 98/17 residency status of individuals who enter Australia , and Taxation Ruling IT 2650 residency status of individuals who temporarily live outside Australia. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - (i) Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this the AAT has stated that: Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home. ( Iyengar v FC of T - AAT case [2011] AATA 856, 2011 ATC 10-222, [2011] 85 ATR 824) You left Australia some time ago and travelled for 18 months spending the majority of time with family in country A. You expect to return to Australia for one month to be with family. | Detailed Reasoning - (ii) Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. You are a Citizen of Australia and country A. | Detailed Reasoning - (iii) History of residence: You were born in Australia. You left Australia some time ago and travelled for 18 months spending the majority of time with family in country A. You returned to Australia for a short time. You then stayed with family in country A. You have worked in country B on a casual private basis. Recently you have not been working and have been travelling with friends. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia. (TR 98/17). You are travelling with friends. You are single with no children. You expect to recommence work on a casual private basis in country B for a short time in the near future. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia. You plan to return to Australia to visit family for a short period soon. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You will be absent from Australia for some time while you are travelling with friends overseas. | Detailed Reasoning - (vii) Family and business ties to Australia and the overseas country or countries.: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: You have family in Australia who you are very close to and you have family in country A. | Detailed Reasoning - Business or economic: You have casual employment in country B. | Detailed Reasoning - Assets: Your asssets in Australia include two bank accounts with a combined balance in excess of $200,000 and a credit card. You do not have any assets overseas. | Detailed Reasoning - (viii) Maintenance of place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You do not have a permanent place to live in Australia. While in country B you will be staying with a friend and paying rent. | Summary: As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you have ceased to be a resident of Australia. Specifically: · You have not been working and have been travelling overseas with friends. · You have worked in country B on a casual private basis and expect to recommence in the near future. · While in country B you will be staying with a friend and paying rent. · You expect to return to Australia for a short period in the near future to be with family during your stay overseas. · You do not own any land or dwellings in Australia, but have retained your Australian bank accounts. · You intend to return to Australia permanently after your overseas stay. · You are single with no dependants. · You do not have any assets overseas. · You do not have permanent employment in country B. Based on a consideration of all of the factors outlined above you are not a resident of Australia according to the resides (ordinary concepts) test as you do not maintain a continuity of association with Australia for the relevant periods. | Detailed Reasoning - The domicile test: If a person is considered to have 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. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. 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. Australia is your country of origin and you are an Australian and a country A citizen. You have been/will be travelling and will be living and working casually in country B. However, your domicile has not changed as you have not taken steps to apply for citizenship or obtain a permanent resident's visa in country B or any other country. | 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. 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; iii. 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; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. 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. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Consideration of these factors: You: · are single with no dependants; · left Australia to travel overseas; · have accommodation in country B, staying with a friend and pay rent during the course of your overseas stay; · have no social or sporting affiliations in Australia; · have no social or sporting affiliations with country B; · will return to Australia for a holiday to visit family at some stage during your overseas stay; and · intend to return to Australia permanently. The Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. You are a resident of Australia under the domicile test. | Detailed Reasoning - Conclusion: As you are considered to be a resident of Australia under the domicile test of residency outlined in subsection 6(1) of the ITAA 1936, there is no need to examine the remaining tests. Therefore you will continue to be a resident of Australia for income tax purposes for the period that you are overseas. | Detailed Reasoning - Lodgement of an income tax return: Section 6-5 of the 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. Assessable income includes salary and wages and interest from bank accounts. In your case you hold a number of Australian bank accounts and in addition will be seeking employment in country B. As you are considered to be a resident of Australia for income tax purposes, the income that you will receive from all these sources during this period will be assessable in Australia, under section 6-5 of the ITAA 1997. Therefore, as the any income you will receive will be assessable in Australia during this period, you will be required to lodge an Australian income tax return and include the income that you have received in the income year that it has been received. | Detailed Reasoning - Further information: Foreign income tax offset (FITO) A Foreign income tax offset (FITO) is available to taxpayers to protect them from the double taxation that may arise where the taxpayer pays foreign tax on income that is also taxable in Australia. This is achieved by allowing a taxpayer to claim a tax offset where they have paid foreign tax on amounts included in their Australian assessable income. You can find further information on FITO by visiting the ATO website at www.ato.gov.au.

Your country of origin is Australia. | You have an overseas passport. | You have travelled to country B to obtain life experience. | You left Australia and travelled overseas for over one year spending the majority of time with family in country A. | You returned to Australia for a short period of time. | You then stayed with your family in country A. | You have worked in county B on a casual private basis. You expect to recommence soon for a short period of time. | You have not been working recently and have been travelling overseas with friends. You intend to remain overseas until 20XX. | You expect to return to Australia for a short period over summer to be with family. | You intend returning to Australia permanently in 20XX after your overseas stay. | Your assets in Australia consist of two banks accounts with a combined balance of in excess of $200, 000 and a credit card. | You have family in Australia who you are very close to and you still maintain regular contact with friends and work colleagues here. | You have no social or sporting affiliations in Australia. | You do not have any overseas assets. | You have no social or sporting affiliations in country B. | Your family and siblings will not be accompanying you overseas.