Edited version of your written advice

Authorisation Number: 1012932323567

Date of advice: 5 January 2016

Ruling

Subject: Residency

Question:

1. Were you an Australian resident for tax purposes in the year ended 30 June 20YY?

Answer:

Yes

Question:

2. Were you an Australian resident for tax purposes in the year ended 30 June 20ZZ?

Answer:

Yes

This ruling applies for the following periods:

Year ended 30 June 20YY

Year ended 30 June 20ZZ

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born overseas.

You migrated to Australia over 40 years ago and have resided in Australia since then.

Your spouse, children and extended family reside in Australia. All are Australian citizens.

Your income producing assets are rent producing real estate in Australia.

All of your assets including your personal possessions, apart from some personal effects which you have with you, are in Australia.

You are not an Australian citizen. In 20YY, you departed Australia for a short overseas holiday. It was your intention to return to Australia.

For legal reasons, you have been unable to return to Australia.

You do not have a fixed place of accommodation available to you overseas and you have no fixed address.

You are not working and have not been looking for employment overseas. You only took enough money to meet your holiday expenses when you left Australia in 20YY. Your family has sent you money to enable you to live and are also funding your attempts to return to Australia.

You were never a member of a superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976.

You were present in Australia for more than one half of the income year in the year ended on 30 June 20YY.

Relevant legislative provisions

Income Tax Assessment Act 1936 - subsection 6(1)

Income Tax Assessment Act 1997 - section 6-5

Taxation Administration Act 1953 - section 357-110 of Schedule 1

Taxation Administration Act 1953 - section 359-35 of Schedule 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.

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 taxation 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 (ordinary concepts) test

Recent taxation cases have considered the following factors as assisting in determining whether a person is a resident for taxation purposes 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 identified by the Commissioner of Taxation in Taxation Rulings IT 2650 Income Tax: residency - permanent place of abode outside Australia (IT 2650) and TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17).

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

You were born overseas and you are not a citizen of Australia. You have lived in Australia for over 40 years.

You departed Australia in 20YY for a brief holiday and your intention was to return to Australia.

For legal reasons, you have been unable to return to Australia.

Relevant financial year

You were physically present in Australia for more than one half of the year during the relevant financial year.

Your family reside in Australia and are Australian citizens. All of your assets, including rental properties, were in Australia. You have not established a permanent place of abode outside Australia.

Based on the above factors, your physical presence in Australia during most of the relevant year (and prior years) suggests a 'mode of life' that is consistent with residing in Australia for taxation purposes. As a result, we conclude that you were an Australian resident for tax purposes under the 'resides' test in the relevant financial year.

Subsequent financial year

During the subsequent financial year, you were not physically present in Australia at any time during the income year. You were unable to return to Australia. However, your family continued to reside in Australia. All of your assets, including rental properties, were in Australia.

The issue of a 'physical presence' in Australia for taxation purposes was discussed in Iyengar v Federal Commissioner of Taxation [2011] AATA 856.

In that case CR Walsh stated:

Whether the person is physically present in a country at some time during the year of income is a factor which has been considered by the courts as relevant: see AFITR at [29-025]. There is a distinction between maintaining a place of residence and actually residing in that place. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

"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 involuntarily, 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." [Emphasis added]

Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year: see AFITR at [29-025]. However, there have been exceptions to this…

Viewing all the facts presented, as a whole, including your inability to return to Australia and your physical presence overseas, your circumstances do not demonstrate routine behaviour that is consistent with living in Australia, nor is it consistent with your behaviour in prior years. For these reasons, we conclude that you are not a resident for Australian tax purposes under the 'resides test' in the subsequent financial year. As a result, we need to consider the extended definition and the other tests of residency for taxation purposes.

The domicile test

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

A person's domicile is generally their country of birth which is known as a person's 'domicile of origin'. A person may acquire a domicile of choice that is different to their domicile of origin.

The common law test of 'domicile of choice' has been restated in section 10 the Domicile Act 1982. The test is that to acquire a domicile of choice in a country a person must have the intention to make his or her home indefinitely in that country. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice. Whether a person has abandoned a domicile of choice with the 'intention' of remaining permanently or indefinitely in the country of new domicile is a question of fact dependant on the particular circumstances of each case.

You were born overseas making your country of birth your domicile of origin. You are not an Australian citizen but have lived in Australia since migrating here over 40 years ago. You acquired Australia as your domicile of choice on or after coming to Australia and you formed the intention to remain indefinitely. We accept that your domicile of choice was Australia prior to the subsequent financial year.

Whether or not you have abandoned your domicile of choice in the subsequent financial year is a question of fact. Based on the facts provided, we accept that you did not abandon Australia as your domicile of choice during the subsequent financial year. In particular we accept that:

• When you left Australia in 20YY it was for the purposes of a holiday and you did not intend to leave on a permanent basis.

• Your intention was to return to Australia.

• Your family, as well as your assets, most of your possessions and the home you previously lived in are in Australia.

• You did not live in fixed accommodation overseas during the subsequent financial year.

Using the above reasoning, the Commissioner accepts that you have maintained Australia as your domicile of choice during the subsequent financial year.

Therefore, you are considered to be an Australian resident for tax purposes in the subsequent financial year.

If, despite you being domiciled in Australia, the Commissioner is satisfied your permanent place of abode is outside Australia, then you will not be a resident for taxation purposes. On the facts provided, the Commissioner is satisfied you did not have a permanent place of abode outside Australia in the subsequent income year.

183 day test

A person is considered to reside in Australia if they are present in Australia for at least 183 days in the relevant year unless their usual place of abode is outside Australia and there was no intention to take up residency in Australia.

During the relevant financial year, the facts provided by you support the conclusion that you were present in Australia for at least 183 days. The Commissioner is not aware of any facts that suggest your usual place of abode was outside Australia. As a result, the Commissioner is not satisfied your usual place of abode was outside Australia in the relevant financial year.

During the subsequent financial year, you were not present in Australia at all.

Under the 183 day test, you are considered to be a resident for Australian tax purposes in the relevant financial year but not in the subsequent financial year.

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