Edited version of private ruling

Authorisation Number: 1011773657349

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Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for Australian income tax purposes?

No.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You are of overseas origin.

You are a citizen of your country of origin.

You are single with no dependants.

You are a sole trader in the financial markets.

You intend to live in Australia for a number of months each year and exclusively trade in your country of origin's stock market shares.

During this period you will not engage in any employment in Australia.

This pattern will be repeated for a number of years.

While in Australia you will be on a tourist visa.

While you are in Australia you will be renting an apartment.

You have an apartment in your country of origin which is not being leased out while you are visiting Australia.

The remainder of your assets are also in your country of origin.

You have no social ties in Australia.

You have no social ties in your country of origin.

You have no intention of permanently residing in Australia.

You are over 16 years of age.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 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.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary is 'to dwell permanently or for a considerable time; having one's abode for a time'.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

The following factors are useful in determining whether the behaviour over the time spent in Australia reflects a degree of continuity, routine or habit that is consistent with residing here:

(a) intention or purpose of presence;

(b) family and business/employment ties;

(c) maintenance and location of assets; and

(d) social and living arrangements

In your case, you are not considered to have resided in Australia as your behaviour does not reflect the degree of continuity, routine or habit that is consistent with residing here. This is because:

· you intend to stay for a number of months for a number of years on a tourist visa and do not intend to reside in Australia permanently;

· you are single with no dependants, and while in Australia do not intend to seek employment;

· you are maintaining your unoccupied residence in your country of origin;

· all of your other assets are outside Australia;

· you do not have any social ties to Australia;

The domicile/permanent place of abode 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. In your case, your domicile will remain unchanged as you will still be a citizen of your country of origin during the stay in Australia.

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.  Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia provides the Commissioner's view on what is considered a person's permanent place of abode and at paragraph 15 defines permanent place of abode as:

the taxpayers fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayers presence, the duration of his presence and the durability of his association with the particular place.

IT 2650 also examines the factors to be taken into account in determining whether a person who leaves Australia temporarily to live overseas will be considered an Australian resident during their absence. These tests can be applied equally in the situation of a person leaving another country to live in Australia temporarily. Paragraph 23 of IT 2650 states that the following factors need to taken into account in order to determine an individual's permanent place abode:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) any intention either to return to your country of origin at some definite point in time or to travel to another country;

(c) the establishment of a home outside Australia;

(d) the abandonment of any residence or place of abode the individual may have had in their country of origin;

(e) the duration and continuity of the individual's presence in the overseas country; and

(f) the durability of association that the individual has with a particular place in Australia.

The weight to be given to each factor will vary with the individual circumstances of each case and no single factor on its own is conclusive. However, the Courts have determined that greater weight should be given to factors (c), (e) and (f).

Applying these factors to your situation, it can be stated that::

(a) you are intending to be in Australia for a number of months period;

(b) you will leave Australia at the end of this time and travel to another country/ies and expect to follow this pattern of trave for the next number of years;

(c) you will be renting to an apartment while in Australia;

(d) you will continue to maintain your residence in your country of origin, which will remain unoccupied;

(e) after each stay you will return overseas;

(f) all your assets are in your country of origin.

In considering the above factors, you are not considered to have established a permanent place of abode in Australia as you will continue to maintain your residence in your country of origin (which will remain unoccupied), and you have no intention of permanently residing in Australia. In addition, all your assets including your residence are located in your country of origin.

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.

In your case, although your stay in Australia will exceed 183 days, it has been established that your permanent (usual) place of abode is outside Australia and as you have no intention of applying for permanent residency, you do not satisfy this test. 

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.

This test does not apply to you as at no stage were you a Commonwealth (Australian) government employee and therefore eligible to contribute to these super funds. In addition you are single and over sixteen years of age.

Conclusion

As you do not meet any of the tests of residency outlined in subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936, you are not considered to be a resident of Australia for tax purposes for the 2011-12 income year.

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