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Authorisation Number: 1012365106218

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Ruling

Subject: Residence

Questions and answers:

Are you a resident of Australia for tax purposes?

Yes

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

Your country of birth Australia

You are a dual citizen of Australia and Elsewhere

You acquired your Elsewhere citizenship in 200X under a right of heritage.

As an Elsewhere citizen, you do not require a visa for some other countries.

You volunteered abroad in 200X and returned to Australia in 2the following year 200Y.

You were abroad for 5 months in 200Y.

You departed Australia on your current absence in a recent year

You have returned to Australia for a 2 week stay, to attend a family event.

You are considering a trip to Australia over the coming holiday break.

You travelled to Elsewhere with no absolute intention of stay there. You initially went there as a studying holiday to learn the language.

You initially expected to stay in Elsewhere for three to six months.

You do not intend to live abroad permanently.

Your personal effects are still in Australia.

After being in Elsewhere for 6 months, you decided to stay in Elsewhere for a further numerous, therefore your stay in Elsewhere will be for a total of less than 2 years.

You are living in a rental property in Elsewhere.

Upon cessation of your stay in Elsewhere, you will travel abroad for a period of 5 months.

Abroad, you intend to take up a rental property lease to accommodate you for the duration of your stay.

You have applied for entry to a University in a third country.

If accepted, your intention is to travel to the third country to undertake postgraduate studies for 3 to 4 years.

To date, you have not been advised if you have been accepted into the postgraduate course in the third country.

Currently you are working in Elsewhere. You are working in a part time job on a standard short term contract until early in the subsequent year.

You pay income tax on your employment earnings.

You have an Elsewhere bank account.

You last address in Australia was your relative's home. You paid them rent to stay there.

When you return to Australia, you will stay with your relatives.

Your assets in Australia include a bank account and shares.

Your family has not accompanied you overseas.

All of your family live in Australia, most of your friends are in Australia.

You have no family in Elsewhere, though you have a few friends.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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, and

· the superannuation test.

The first two tests are examined in detail in Taxation Ruling 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides test

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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

You left Australia in 20XX.

Your history of movement show you lived away as a volunteer between 200X and 200Y. You then went elsewhere in 200Y for several months.

The purpose of your visit was to study and learn the local language for several months. You took up a job and extended your stay in Elsewhere to less than 2 years.

You returned to Australia on one occasion for family reasons for a couple of weeks.

You have indicated that you have no family ties with Elsewhere as your family is predominantly in Australia.

You have indicated that your relative's home is available for you to occupy when you return to Australia.

Considering your circumstances, as a broad rule of thumb, a period of about 2 years or more would generally be regarded by this Office as a substantial period for the purposes of a taxpayer's stay in another country. You period of stay in Elsewhere is less than two years.

You maintain a strong association with Australia as the majority of your family and assets remain here. There is no evidence that you have abandoned your residence in Australia, as you have a continued, albeit not immediate, intent to return to Australia. Your return date to Australia is subject to an opportunity of study arising in the third country which to date is not confirmed.

Your history of movement shows that you have been living a transient lifestyle for the past few years, you have not settled in any one place outside Australia.

On the weight of your circumstances, we consider that you are a resident under the resides test.

The domicile 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.

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.

You are a dual citizen of Australia and Elsewhere. You were born in Australia, you took up elsewhere citizenship under a right of heritage rather than a process of immigration. You do not require a visa for some other countries.

You indicate that you received your elsewhere passport in 200X. Your elsewhere passport compliments your travel plans from 200Y onwards, whereby you stayed in another country for 5 months, currently in Elsewhere, next year to another country and where opportunity permits, another country thereafter. From your history of movement, we can not establish that you have acquired an elsewhere passport for the purpose of resettlement in Elsewhere.

As you have not taken active steps to make your Domicile another country your Domicile is Australia.

Permanent place of abode

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.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

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

(b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

(c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

(d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

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

(f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

From your advice:

· You intended length of stay in Elsewhere progressed from 6 months to numerous months.

· You never intended to stay in Elsewhere from the outset of your journey. You have stated that your intentions are to move on to another subsequent country after your numerous months in Elsewhere have ended. After the subsequent country, you will move onwards to another country to do studies. You have stated that you will return to Australia.

· We can not conclude that you have established a home outside of Australia, as your family remains here and your personal effects remain here. Your home being your place to ultimately return to points to Australia. Whilst you are spending a significant time away from Australia, it does not show signs of permanency.

· You have a residence in Australia with your relatives. We can not see signs of abandoning your relative's place and your home, as you intend to return there.

· The duration of your stay in Elsewhere being less than 2 years is not considered a substantial period by this office. Paragraph 25 Taxation Ruling IT 2650.

· You have a durable association with Australia. You own shares in Australia, you have savings and your family ties are mostly here.

Your permanent place of abode is Australia. Your current activities are characteristic of a long term traveller, your intention to travel to Elsewhere was to study language, you gained employment and you decided to extend your stay. Whilst a permanent place of abode does not have to be everlasting or forever, we need to contrast your home in Australia with your current and proposed arrangements which we see as being transitory in nature. You are a resident of Australia under this test.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent place of abode is outside of Australia and they have no intention of taking up residence here.

You are not a resident under this test while you are travelling as you will not be actually in Australia for long enough in any one financial year.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:

· established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or

· established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or

· the spouse or child under 16 of a person covered by either of the above funds.

You have never been a Commonwealth government employee and therefore you are not able to contribute to the abovementioned superannuation schemes.

Your residency status

Resident

As you meet the resides and domicile tests, therefore you are a resident of Australia for tax purposes.

As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia and will therefore include the income you receive from employment and bank account interest in Elsewhere.

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