Private ruling: residency
Published: June 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Are you an Australian resident for tax purposes? | No.

Relevant facts and circumstances: You were born in Australia and are an Australian citizen. You lived in Australia on a permanent basis prior to your departure to Country B in 20XX. You obtained a volunteer visa to enter Country B that does not allow you to stay permanently. You have accepted a volunteer contract for X years with Organisation A. You intend to reside outside Australia for the length of the volunteer contract only and will return to Australia once it is completed. You intend to go back to Employment A when you return to Australia. You intend to return to Australia for 4-5 weeks each year while away. You have been provided with a small monthly living allowance with food, accommodation and medical needs taken care of by Organisation A. You have been provided with a furnished apartment while living in Country B. Your home in Australia is being rented out while you are away. Your home furniture and some other items have been stored in your garage while overseas. You have also given some household effects to your children and taken some to Country B with you. You have adult children living and working/studying in Australia. You have extended family living in Australia. You own a car in Country B. You have bank accounts and superannuation in Australia. The only income you are receiving from Australia is rental income. You have no overseas employment as you are a volunteer only. You have social connections with family and the community in Australia. You have social connections with the community in Country B. You have not been removed from the Australian electoral role as you intend to vote while overseas. You have informed your bank of change of address only. You have changed your address with Medicare and your private health insurer, and you have put your private health insurance policy on hold. You stated 'serving as a volunteer' as your reason for going overseas when completing the Australian Immigration Outgoing passenger card.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6(1) | Income Tax Assessment Act 1936 Subsection 6-5(3) | Income Tax Assessment Act 1936 Subsection 6-5(3)(b) | Income Tax Assessment Act 1997 Section 995-1(1)

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: 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 provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, the Commissioner accepts that you were not residing in Australia according to the ordinary meaning of the word from the date you left for Country B | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside 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 acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. In your case, your domicile of origin is Australia. You formed an intention to make Country B your home for X years when you signed a contract as a volunteer for X years with Organisation A. Although you intend to return to Australia upon completion of your contract in X years, we consider that you have made Country B your permanent place of abode because: • Your spouse has relocated with you. • You signed a X year contract with the Organisation A. • You have been provided with a furnished apartment in Country B for you and your spouse to live in for the X years you are there. • You have rented out your house in Australia. • You will only visit Australia for 4-5 weeks each year. Therefore, from the time you depart Australia for Country B you are a non-resident under the domicile test. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You were in Australia for more than 183 days in the 2015 financial year. However, it is considered that your usual place of abode was outside Australia from the date you departed for Country B, and therefore you were a non-resident from this date. | Detailed Reasoning - Superannuation test: Based on the facts you have provided this test is not relevant in your situation as it only applies to persons eligible to contribute to the superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 from the date you departed for Country B. Therefore, you are not considered to be a resident for tax purposes the date you departed for Country B. | Detailed Reasoning - Taxation requirements of a non-resident: Subsection 6-5(3) of the ITAA 1997 states: If you are a foreign resident, your assessable income includes: (a) the ordinary income you derive directly or indirectly from all Australian sources during the income year; and (b) other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source. In your case, the rental income you earn from your Australian property will be assessable income in Australia. You will be required to pay non-resident tax on this income, and any other income covered under subsection 6-5(3) of the ITAA 1997.