Private ruling: Residency
Published: January 2014
Ruling period: Date 1 to Date 2.
Date scheme commenced: Date 1

Ruling: Question and answer: | Were you a resident of Australia for taxation purposes from Date 1 to Date 2? | No.

Relevant facts and circumstances: You country of origin is Country A, of which you are a citizen. You have a spouse and children. Several years ago you, your spouse and children relocated to Australia from Country A. You have an Australian visa granting you permanent residency status in Australia. Your spouse and a child are citizens of Australia and reside in Country A. Your other child is also an Australian citizen but remains in Australia to study. Your spouse has a right to reside permanently in Country A. The conditions of her/his residency state that she/he cannot reside outside Country A for more than several continuous months. You formed the intention to make your home indefinitely outside Australia (in Country A) due mainly to the high cost of living in X and the high value of the Australian dollar against the currency of Country A. Before your departure, you were living in a rented property in X. The lease ended on the dwelling in X which had been your family home. You disposed of your furniture before departing Australia. You, your spouse and a child departed Australia to live in Country A. At this time you had a return ticket because its price was similar to that of a one-way ticket. This was your other child's first time away from family, and continued to study in X. In case of emergency you might need to fly immediately to visit your other child. You have no copy of the ticket. You stopped renting out property you own in Country A. You undertook renovations which cost over $XXXX then moved in to the property as your family home. You keep your furnishings and household effects in the property in Country A. The child who lives with you could not cope with her/his new school environment in Country A and wanted to return to the school in X to complete her/his education. You returned to X for about two weeks to arrange for the re-enrollment of your child in the old school. Upon confirmation of the re-enrollment, you, your spouse and child returned to X on Date to accompany your child for her/his examination. When she/he finished her/his examination, you, your spouse and child returned to Country A, on Date 2. You have resided there until the present time. Your family home in Country A was rented out while you were in Australia. After deciding to leave Australia permanently, you obtained health insurance in Country A for the whole family. You did not have any Australian sourced income after you departed Australia. Your ABN was cancelled from this time. You have been employed in Country A by two employers for several years to the present. Your employment is permanent but you have no employment contract. You were still employed in Country A during your stay in Australia. You have no position of job being held for you in Australia. You have church friends in X. In Country A you have the following social and sporting connections: · Church friends · A University alumni society · A gymnasium & recreational club · A fellowship of business people in Country A · Regular family gatherings with your extended family who are all in Country A. You have assets and income in Country A, including shares and a debenture, life insurance policies, a car parking space property and a provident fund, similar to superannuation in Australia. You and your spouse have minimal assets in Australia: no property, no shares and no superannuation. You and your spouse have bank accounts which are not often used and kept active for convenience as it is difficult to open an account for a foreign resident. Furthermore, it is convenient to maintain active accounts in case of visits to Australia as your son still resides here and it is likely that will visit Australia. You receive no income from Australia. Neither you nor your spouse is or was a Commonwealth Government employee for superannuation purposes. You are over 16 years of age. You have not advised Medicare to have your name removed from their records. You cannot remember what reason you gave for going overseas when completing the Australian Immigration Outgoing passenger card. Your Australian health insurance was not cancelled upon your departure from Australia. The primary motive for this was to maintain cover for your child who remains in Australia. There were two assets to which CGT event I1 happened. There will be net capital gain included in a tax return. An election has been made to disregard the capital gain.

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) 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 (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 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | 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: · Physical presence in Australia · Nationality · History of residence and movements · Habits and "mode of life" · Frequency, regularity and duration of visits to Australia · Purpose of visits to or absences from Australia · Family and business ties to different countries · 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. | Detailed Reasoning - 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. Several years ago, you and your spouse and children relocated to Australia from Country A. And you obtained a visa granting you permanent residency status in Australia. You formed the intention to make your home indefinitely outside Australia due mainly to the high cost of living in X and the high value of the Australian dollar against the currency of Country A. The lease on the rented family home in NSW ended and you disposed of your furniture. You, your spouse and a child departed Australia to live in Country A. Your other child remains in Australia to study. You moved into a dwelling you own in Country A which you own. You keep your furnishings and household effects in this property. You, your spouse and a child returned to X on Date 1 so your child could complete a course of education. After the completion of the course of education, you, your spouse and the child returned to Country A, where you have resided there until the present time. You have been employed in Country A for several years and remained so while you were in Australia for your child's course of education. You have no position or job being held for you in Australia and receive no income from Australia. | Detailed Reasoning - 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 were born in Country A and you are a citizen of Country A. | Detailed Reasoning - 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. You have employment in Country A. You live with your spouse and a child live in a dwelling you own in Country A. In Country A you have extensive family, social and sporting connections. You have a child in Australia. | Detailed Reasoning - 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 period of two years and seven months to be residing in Australia. You, your spouse and daughter departed Australia to live in Country A. You returned to X for about two weeks to arrange for the re-enrollment of your child in the school she had been attending. Upon confirmation of the re-enrollment, you, your spouse and child returned to X on Date 1. When the course of study was complete, you and your family (except for one child) returned to Country A, on Date 2. You have resided there until the present time. | Detailed Reasoning - Purpose of visits to or absences from Australia: As discussed above, since departing Australia for Country A on, you have returned to Australia twice, solely for your child's education: first for about two weeks and then from Date 1 and Date 2. | Detailed Reasoning - 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. Family You have extended family that are all in Country A. You have a child in Australia who is studying. Business You are employed in Country A. Assets You have assets in Country A, including shares and a debenture, life insurance policies, a car parking space property and superannuation. You and your spouse have no assets in Australia except bank accounts which are not often used and kept active for convenience You receive no income from Australia. | Detailed Reasoning - 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 rented a property in Australia but surrendered the lease upon departure for Country A. You own a dwelling in Country A where you and your family live and where you keep your household effects. | 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 are not a resident of Australia. Specifically: · You live in Country A with your spouse and a child · You live in a dwelling you own · You intend remaining in Country A permanently · You work in Country A · You have family, business and social/sporting connections in Country A Based on a consideration of all of the factors outlined above you are not a resident of Australia according to ordinary concepts as you have not maintained a continuity of association with Country A while in Australia for the relevant period. You were not a resident of Australia in the relevant period under the resides (ordinary concepts) test. | 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'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. Your domicile of origin is Country A. You have not indicated that you have changed or are going to change your domicile. Your domicile is therefore Country A. You are a not resident under this test. | Detailed Reasoning - The 183-day test: When a person is present in Australia for 183 days or more 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 returned to X for about two weeks to arrange for the re-enrollment of your child in the school. Upon confirmation of the re-enrollment, you, your spouse and child returned to X on Date 1. After completion of your child's course of education, you returned to Country A on Date 2 and moved back into your Country A property. For the income year ended 30 June 2012, you were in Australia more than 183 days. For the income year ended 30 June 2013, you were in Australia a period of less than 183 days. Accordingly you are not a resident of Australia under this test for the 2012-13 financial year. You rented a property to live in while in Australia. You then returned to Country A and moved back into the dwelling you own there. The Commissioner is satisfied that your usual place of abode is outside Australia and did not intend to taking up residence in Australia. While you were present in Australia for more than 183 days in the 2011-12 income year as your usual place of abode is outside Australia and you did not intend to take up residence in Australia, you are not a resident of Australia under this test for the 2011-12 financial year. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Only Commonwealth Government employees are eligible to contribute to the CSS and PSS. As neither you nor your spouse was a Commonwealth Government of Australia employee and you are over the age of 16 you will not be treated as a resident under this test. Your residency status: You were not a resident of Australia for taxation purposes for the period from Date 1 to Date 2.