Private ruling: Residency
Date of advice: 23 December 2015
Published: March 2016
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Questions and answers | 1. Are you a resident of Australia for taxation purposes? | No. | 2. Is your income derived in Country Y assessable in Australia? | No.

Relevant facts and circumstances: You were born in Australia. You are a citizen of Australia. You are not a permanent resident or citizen of any other country. You lodge your Australian tax returns as a non-resident of Australia for taxation purposes. You have worked and lived outside Australia for the majority of the past XX years. You and your family went to Country Y to live and work. You sold your family home in Australia Your children were enrolled in School in Country Y. You transported your personal affects along with those of your family to Country Y. You were renting an X bedroom house in Country Y. Your spouse and children have returned to Australia. You and your spouse are separated. You have down sized your house in Country Y due to the separation. Your children will visit you in the school holidays. You will visit the children in Australia but will not exceed 183 days in Australia in any financial year. You intend on applying for permanent residency in Country Y. Neither you, nor your spouse, are eligible to contribute to the relevant commonwealth super 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 to live and work. Prior to your move to Country Y you lived and worked outside Australia for the majority of the past XX years. Your spouse and children accompanied you to Country Y. You and your spouse are now separated and your spouse and children have returned to live in Australia. You have down sized your property in Country Y. You will return to Australia to visit the children from time to time. Based on the above facts you are not residing in Australia according to ordinary concepts. | Detailed Reasoning - The domicile test: If a person's domicile is in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. 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. 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. Your domicile of origin is Australia. The Commissioner is satisfied that you have a permanent place of abode outside Australia for the following reasons: • You have been living and working in Country Y for a number of years • You have taken all your belongings to Country Y • You have been working outside Australia for the majority of the past XX years You are not a resident under this test. | 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 will not be in Australia for more than 183 days in any financial year. You are 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 and your spouse are not eligible to contribute to the relevant Commonwealth super funds. You are not a resident under this test. | Detailed Reasoning - Your residency status: You are not a resident of Australia for taxation purposes. Your income derived in Country Y will not be assessable in Australia.