Private ruling: Residency
Date of advice: 29 September 2015
Published: November 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | No.

Relevant facts and circumstances: You are you a citizen of Australia. Your country of origin is Australia. You have not been granted permanent residency by any country. You departed Australia. You entered a foreign country on a two year working holiday visa. The visa does not allow you to stay permanently. You intend to reside overseas permanently. You formed the intention to make your home indefinitely outside Australia. You do not hold a return airline ticket. You will come back to Australia to visit family and apply for permanent residency visa to live in a foreign country with your partner. Prior to leaving you lived in Australia with your family. Your only asset overseas is a bank account. Your Australian assets are a car and a bank account. You receive a small amount of interest from your bank account. Your intention is to cancel this account when you leave Australia. Your household effects in Australia are stored at your parents' house. You have employment in a foreign country. There is no employment contract and the employment cannot be extended. You do not have a position or job being held for you in Australia. Your family did not accompany you overseas. Your partner is a citizen of a foreign country. You met in Australia and you have travelled together back to a foreign country. You are living with your partner's parents' house. You have no social and sporting connections with Australia. You have no social and sporting connections with a foreign country. Neither you nor your partner has ever been a Commonwealth Government of Australia employee for superannuation (super) purposes. You have not advised the Australian Electoral Office to have your name removed from the electoral roll. You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted. You have you advised Medicare and/or health insurance provider to have your name removed from their records. You have lodged one tax return in a foreign country. You stated working holiday overseas as the reason for going overseas when completing the Australian Immigration Outgoing passenger card.

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: (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. There are several factors outlined above which indicate that you have ceased to be a resident of Australia, specifically: • You depart Australia to live and work in a foreign country • You entered a foreign country on a working holiday visa which does not allow you to stay permanently • You live with your partner in a foreign country at their parent's home • Prior to leaving you lived in Australia with your family. • You have found employment in a foreign country but do not have a job being held for you in Australia • You formed the intention to make your home indefinitely outside Australia • You do not have a position or job being held for you in Australia • You do not hold a return airline ticket • You will come back to Australia to visit family and apply for permanent visa to live in a foreign country with your partner. Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the relevant period. | Detailed Reasoning - The domicile and permanent place of abode test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. As you are still an Australian citizen while living in a foreign country, your domicile is Australia and remains unchanged. | 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. • You depart Australia to live and work in a foreign country • You live with your partner in a foreign country at their parent's home • You have found employment in a foreign country • You have formed the intention to make your home indefinitely outside Australia • You will come back to Australia to visit family and apply for permanent residency visa to live in a foreign country with your partner. Based on the facts, the Commissioner is satisfied you have a permanent place of abode outside of Australia. Therefore, you are not a resident of Australia under the 'domicile and permanent place of abode' test of residency. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You have not been present in Australia for a total period of more than half of the year of income. Therefore you were not a resident of Australia under the 183-day test. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse/partner 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 have stated that neither you nor your partner is eligible to contribute to the PSS or the CSS. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.