Private ruling: Residency
Published: August 2014
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you a non-resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: Your country of origin is Country X and you are a citizen of Country X. You are retired from the work force. You have been travelling to Australia for holidays for the past few years and have decided to purchase a holiday house as you spend up to five months on average or sometimes more than six months (over three to four times a year) in Australia. When you are in Australia you spend time playing sport, enjoying the sunshine, spending time with friends you meet while on holiday. You do not have any assets in Australia (other than the holiday home you intend to purchase) and do not intend to work or have investments or business in Australia. You have a house in Country X where you live with your partner and all of your assets and sources of income are in Country X. Your partner still works in Country X and your children, grandchildren and other relatives all live and work in Country X. You have club memberships and belong to a church community in Country X. Neither you nor your partner, have been Commonwealth Government of Australia employees for superannuation purposes. You do not intend to live in Australia permanently but for holiday purposes only.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 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. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), 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.' In considering the definition of 'reside', the court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, it was stated that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): 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. You intend to be in Australia up to four times a year for holidays, your total time in Australia is approximately five months in a financial year but may sometimes exceed six months. | Detailed Reasoning - (ii) Nationality: Your country of origin is Country X and you are a citizen of Country X. | Detailed Reasoning - (iii) History of residence: You have always lived and worked in Country X. For the last few years you travel to Australia for holidays. | 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. • You have a house in Country X and live there with your partner. • All of your family members live and work in Country X. • You travel to Australia for holidays and are buying a holiday house in Australia. • All of your assets are in Country X. • You are a member of clubs and a church in Country X. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You intend to visit Australia three to four times a year. The total length of time in Australia is five to six months in a financial year. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You come to Australia for holiday visits as you enjoy the lifestyle and weather here. | Detailed Reasoning - Family: Your partner lives with you in your house in Country X. Your child and grandchildren live in Country X. | Detailed Reasoning - Business or economic: You do not have any assets in Australia other than the holiday home you are intending to purchase. All of your assets are in Country X. | Detailed Reasoning - (viii) Maintenance of Place of abode: You have a house you live in with your partner in Country X. You intend to purchase a holiday home in Australia which will remain vacant when you are not holidaying here. | Detailed Reasoning - Summary - resides test: You will not be residing in Australia due to the following factors: • you live in Country X with your partner • you do not intend to move to Australia permanently • you come to Australia for holiday purposes only • all of your assets are based in Country X • the holiday home you intend to purchase will be for your personal use for holiday purposes only In consideration of the factors outlined above, you will not be residing in Australia according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test. | Detailed Reasoning - Domicile and permanent place of abode: 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: Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Country X as you are a citizen of Country X and your country of origin is Country X. You are therefore not a resident of Australia under the domicile test. | Detailed Reasoning - 183 day: 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. Taxation Ruling 98/17 Income tax: residency status of individuals entering Australia states that there may be situations where an individual does not reside in Australia during a particular year but is present in Australia for more than one-half of the income year (perhaps intermittently) and intends to take up residence in Australia. Although you may be physically present in Australia for more than 183 days in an income year, as discussed above, the Commissioner is satisfied that you have a permanent place of abode (which would be considered your usual place of abode) in Country X and you have no intention of taking up residence in Australia. Therefore, you are not a resident of Australia under this test. | Detailed Reasoning - Superannuation fund 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. Neither you nor your partner have been Commonwealth Government employees therefore this test does not apply to your circumstances. You are more than 16 years of age. | Detailed Reasoning - Conclusion - your residency status: As you do not meet any of the above tests, you are not a resident of Australia. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997 , your assessable income only includes income gained from sources in Australia.