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Ruling

Subject: residency

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following period:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You were born in a foreign country and you are a citizen of that country.

You are not a citizen of Australia and do not intend becoming one.

For the year ended 30 June 2XXX you were in Australia for more than 183 days.

For the year ended 30 June 2YYY you were in Australia for more than 183 days.

For the year ended 30 June 2ZZZ you were in Australia for more than 183 days.

Your spouse and a member of your family have visited you in Australia on several occasions:

Some of your friends from the foreign country visit you in Australia.

You have other family members who never visit you in Australia.

You own and live in a unit in Australia. In Australia you have a bed, a computer and a TV.

You also own a dwelling in the foreign country where you, your spouse and children live. Your personal belongings are located mostly in the foreign country.

You receive two pensions from the foreign country: a pension paid by the government and a pension paid by your former employer.

You do not work, except managing your investment portfolio looking at fund options. Your only Australian income is from investments such as bank interest and dividends.

You play a lot of sport. You have friends (almost all from the foreign country) some of whom visit you.

Yours is the life of a tourist.

Your social connections with Australia are few: the tax agent is one and the sporting activities.

Your social connections with the foreign country are your spouse, children and their spouses as well as grandchildren, your parents and all your friends. You have sporting connections.

You intend eventually to return to the foreign country permanently. At this time you will sell your Australian dwelling.

Neither you nor your spouse are or were Commonwealth Government of Australia employees.

You are more than 16 years of age.

Relevant legislation provisions:

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the 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 first two tests are examined in detail in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia.

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 satisfy 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. 3rd 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 most cases, the Commissioner accepts that a visit to Australia of less than six months is not sufficient time to be regarded as residing here. However, when an individual is in Australia for six months or more, the Commissioner takes into consideration the individual's behaviour over the time spent in Australia to determine if there is any degree of continuity, routine or habit in the individual's behaviour that is consistent with residing here.

In your case, you are living in Australia for about half of each year returning to the foreign country to visit your family for about half of each year. You have established residences in both Australia and the foreign country in dwellings you own. However, most of your possessions are in the foreign country and you are not in paid employment. You spend your time playing a lot sport. You have described your life in Australia as that of a tourist.

It is considered that your time in Australia lacks the degree of continuity, routine or habit consistent with residing here as you are mainly engaged in recreational and tourist related activities which can be undertaken whenever it suits you and, therefore, you were not a resident of Australia under the resides test during the periods.

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.

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.

In your case, as you are still a citizen of the foreign country while living in Australia and you do not intend to remain here indefinitely, your domicile is the foreign country and remains unchanged.

Therefore, you are not a resident under the domicile test during the periods.

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 were in Australia for a total of more than 183 days in each of the years of income. However, the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

Therefore, you are not a resident of Australia under the 183-day test during the periods.

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 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 you and your spouse have never worked for the Commonwealth Government of Australia. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you are more than 16 years of age.

Therefore, you are not a resident of Australia under the superannuation test during the periods.

Conclusion

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.

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