Edited version of your private ruling

Authorisation Number: 1012500212379

Ruling

Subject: Australian residency for taxation purposes

Question and Answer:

Are you an Australian resident for taxation purposes?

Yes

This ruling applies for the following periods:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were born in Country X.

You have lived in Australia since you were a child.

You are an Australian citizen.

You departed Australia in the relevant year.

You moved to Country Y on a work permit. You intend to stay in Country Y until your work permit expires.

You plan to return to Australia in late 20XX when your visa expires.

You will return to Australia for a week in the subsequent year to attend your relative's event.

You are living with a friend in Country Y.

Before you left for Country Y you lived with your parents. You intend to return to your family home when you return.

All of your household effects remain in your family home.

You have maintained your Australian bank account.

You have opened a bank account overseas.

You have purchased a car in Country Y.

You had a temporary job in Country Y from a few months.

You do not have a job in Australia to return to when your visa expires.

You are single.

You do not have any sporting or community connections with either Australia or Country Y.

You have not held a position with the Australian Commonwealth Government and you are over the age of 16.

You did not have your name removed from the electoral roll.

You did not advise any Australian bank that you hold accounts with, Medicare, or a health insurance provider that you were becoming a non resident.

You have not lodged a tax return in Country Y.

You stated on your outgoing passenger card that you were leaving the country for 'work'.

You spend your time in Country Y working, seeking work, sightseeing and visiting friends.

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997

Section 6(1) of the Income Tax Assessment Act 1936

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

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 (ordinary concepts) test.

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 Taxation Ruling TR 98/17 residency status of individuals who enter Australia, and Taxation Ruling IT 2650 residency status of individuals who temporarily live outside Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

(i) Physical presence in Australia

A person does not necessarily cease to be a resident because he or she is physically absent from Australia.

In relation to this the AAT has stated that:

"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 departed Australia to travel to Country Y on a work visa. You intend to return to your family home in Australia to live when your visa expires. You will return to Australia for a period.

You were physically present in Australia for z months of the income year, you had a place in Australia that you intend to return to and that you consider your home.

(ii) Nationality

The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case.

You are an Australian Citizen.

(iii) History of residence

You were born in County X and moved to Australia when you were young. You have lived in Australia for most of your life.

(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.

"Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia." (TR 98/17).

You opened a bank account in Country Y and purchased a car.

You have been spending your time looking for work, you have only been able to secure z months of work since arriving. You have spent time sight seeing and visiting friends.

(v) Frequency, regularity and duration of visits to Australia

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia.

You were living in Australia until you left.

(vi) Purpose of visits to or absences from Australia

You were absent from Australia for a period of time to work in Country Y.

(vii) Family and business ties to Australia and the overseas country or countries

Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident.

Family

You live with your parents in your family home in Australia. You were not accompanied by any family members when you moved to Country Y.

Business or economic

You have worked in a temporary role in Australia for a short period before you moved to Country Y. You completed a short term contract in Country Y but did not renew this.

Assets

· You have a bank account in Country Y,

· You purchased a car in Country Y,

· You maintained your Australian bank account,

· Your personal effects such as television, clothes etc remained in your family home in Australia.

(viii) Maintenance of Place of abode

The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer.

You lived in your family home with your parents before you left for Country Y and this is where you will return to after your visa expires.

Summary

As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Although you have settled into life in Country Y and have been spending your time searching for work, sightseeing and visiting friends there are several factors outlined above which indicate that you have not ceased to be a resident of Australia.

Specifically;

· You only intended to be in Country Y for the period of your visa- two years.

· You only went to Country Y to work and gain work experience.

· You were physically present in Australia for z months before you moved to Country Y, you had a place in Australia that you intend to return to and that you consider your home.

Based on a consideration of all of the factors outlined above you are a resident of Australia according to ordinary concepts as you maintained a continuity of association with Australia for the relevant period.

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 183 day test, superannuation fund test and domicile and permanent place of abode tests.

Domicile and permanent place of abode

If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

IT 2650 states that:

Persons leaving Australia temporarily would generally be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

Application to the your circumstances

You were born in Country X and therefore your domicile of birth is Country Y, however you acquired a different domicile of choice when you received your Australia citizenship.

As you have an Australian domicile you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode;

i. the intended and actual length of the taxpayer's stay in the overseas country;

ii. 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;

iii. 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;

iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

v. the duration and continuity of the taxpayer's presence in the overseas country; and

vi. 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.

As with the factors under the resides (ordinary concepts) test not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Consideration of these factors

· You intend to remain in Country Y for no more than z years.

· You intend to remain in Country Y until the expiration of your visa when you will then return to Australia.

· You have been and will continue to live with a friend in Country Y for the duration of your stay.

· Prior to moving to Country Y you lived in your family home with your relative's and you have left your personal effects in the home and will return there when you leave Country Y.

· You will be in Country Y to work for up to a period of z years. You will leave Country Y for a week to return to Australia to attend your relatives event.

· You purchased a car in Country Y and have opened a bank account.

· You maintain a bank account in Australia and have not advised Medicare and the Australian Electoral Commission to remove you from their registers.

· You intend to return to your home in Australia when your visa expires.

The Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. You are a resident of Australia under the domicile test.

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.

As you were not in Australia for a period of 183 days during the relevant income year this test is not relevant to your circumstances.

Superannuation fund tests

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.

As you have never been an employee of the Australian government and do not have a spouse, the superannuation test does not apply to your circumstances.

Conclusion

You are a resident of Australia under the resides (ordinary concepts) test and the domicile test. You are assessable in Australia on both your Australian sourced and world wide income.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).