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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1012829236513

Date of advice: 24 June 2015

Ruling

Subject: Residency

Question

Were you a resident of Australia for taxation purposes in the relevant financial years?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2014

Year ending 30 June 2015

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Country X.

You became an Australian permanent resident in 200X.

You are based in Australia. You are the Sole Director of your Australian companies.

You spouse and child are based in Country X. Your spouse visits Australia about 3 times a year, about 1 week for each visit.

You departed for Country X in 20XX; you decided to spend most of your time in Country X looking after your parents.

You were hardly involved in your Australian business during your stay in Country X. You left your business to your local managers and staff.

You own a house in Country X, your spouse lives in the house. You stay in the house when you are in Country X.

You own investments, motor vehicles and bank accounts in Country X.

You made several trips to Australia in the 20XX financial year with total duration of 2 months.

You have made several trips to Australia in the 20XX financial year with total duration of 2 months.

The purposes of these visiting are to check on your Australian business and some personal activities.

Your spouse accompanied you to Australia on some trips. You stayed in your own property during your visits; the property was purchased by you and your spouse in 200X.

You purchased another residence in 20XX; you did not move in this residence after the purchase; you did not rent out this residence; you moved in this residence, after renovation of the residence, at the end of 20XX.

You departed for Country X in 20XX. The purpose for this visit is to visit your family.

You intend to move back to Australia permanently from July 20XX.

You and your spouse are not Commonwealth Government of Australia employees for superannuation purposes.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation purposes as 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. The tests are:

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides 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.

In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word:

Based on the facts of your case, the Commissioner accepts that you were not residing in Australia according to the ordinary meaning of the word in the relevant financial years.

The domicile test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin.

In your case, you are a citizen of Country X and you hold permanent residence visa of Australia, and therefore can choose to reside in either country indefinitely. You moved to Country X in 20XX; you decided to spend most of your time to look after your parents; you have a house in Country X; you stayed with your family when you were in Country X. You will move back to Australia permanently from July 20XX. You maintained a fixed address in Country X for more than two years from 20XX.

While you have returned to Australia several times since then, these visits have only been for short periods. You are still residing in Country X with all your family members.

Therefore, we do not consider you an Australian resident for taxation purposes under the domicile test.

The 183-day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied 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, you were in Australia for less than 183 days in the relevant financial years. It is considered that your usual place of abode was outside Australia.

Therefore, you were not a resident of Australia for taxation purposes under this test.

Superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse currently contribute to certain superannuation funds for Commonwealth government employees.

You were not a resident of Australia for taxation purposes under this test as you are not employed by the Australian Commonwealth government.

Conclusion - your residency status

Based on the facts you have provided, you did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Therefore, you were not a resident for taxation purposes in the relevant financial years.

Once you return to Australia permanently, you would be an Australian resident for taxation purposes from the date you arrive back in Australia.

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