Edited version of your written advice

Authorisation Number: 1012933875806

Date of advice: 8 January 2016

Ruling

Subject: Residency status

Question and answer

Are you a resident of Australia for tax purposes?

No

This ruling applies for the following period

Year ended 30 June 2015

The scheme commenced on

1 July 2014

Relevant facts and circumstances

Your country of origin is Australia and you are a citizen of Australia.

You have a spouse and X children.

You accepted an employment contract in Country A more than 20 years ago.

You left Australia to take up the employment contract.

You sold all of your assets and removed your name from the electoral roll.

Your spouse moved to Country A and you were subsequently married and had X children.

Your Country A address is noted as your residential address on Tax Office records.

Some years later you entered into a business in Country A. You have clients in Australia.

You have a Country A work permit and residence visa which is renewable every 12 months.

You have been living in the same house in Country A for more than 20 years.

It was decided that for medical and educational support reasons it would be better for your children to be raised in Australia.

You and your spouse jointly purchased a house in Australia which was then transferred into your spouse's name.

Your spouse continues to live in Australia and you in Country A. The reason why your spouse and children do not live with you in Country A is predominantly due to the lack of health and educational facilities in the area of Country A where you live.

When you return to Australia you stay at the house with your spouse and children.

Your assets in Country A include: a boat, significant personal assets such as furniture, artwork, clothing and a number of Country A bank accounts and credit cards which you have held for many years.

Your significant social connections with Country A include:

• involvement with a number of local charities

• member of a Country A Council

• holding a Country A drivers licence

• holding a Country A tax file number and submitting an annual return

• holding medical insurance

• you have had the same Country A mobile number for many years (you do not hold an Australian mobile number)

You visit Australia for family and business purposes and opportunities to derive new business for Country A.

When you return to Australia you stay with your spouse at the family home.

When you enter Australia you complete the immigration card as a non-resident visiting for business purposes.

You do not get paid in Australia for any of the business you conduct in Australia.

While in Australia, your Country A home is not available for use by anyone else.

You generally do not remain outside of Country A for extended periods of time as you need to be in Country A to ensure the smooth operation of your business.

You do not have any assets in Australia as your spouse has property in her/his name only.

You do not have any bank accounts in Australia. You transfer money from your Country A bank account to your spouse to support him/her and your children.

Your spouse solely operates a business in Australia.

Neither you nor your spouse has ever been Commonwealth Government of Australia employees for superannuation purposes.

You have been treated as a resident of Country A by the Country A tax authorities for more than 20 years and pay tax on your income in Country A.

Visits to Australia - prior to 1 July 2014

You regularly visit Australia to see your spouse and children. Prior to the 20VV-WW income year, you were not in Australia for more than 183 days in any given financial year.

Visits to Australia - 20VV-WW income year

During the 20VV-WW income year, you spent more than 183 days in Australia. This was due family medical reasons. This required you to spend considerably more time with your family compared to previous years.

Despite spending more time in Australia,

• you were able to maintain your Country A business through the use of remote technology

• you continued to manage your business commitments in Country A

• your social and other interests in Country A remained largely unchanged

• all of your assets in Country A remained the same

• your home in Country A remained available for you to use and you did not rent the property out during your absences.

You did not form an intention to relocate to Australia in the 20VV-WW income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for 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 (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' and 'permanent place of abode' test

• the 183 day test; and

• the Commonwealth superannuation fund test.

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.

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'.

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.

• physical presence in Australia

• nationality

• history of residence and movements

• habits and 'mode of life'

• frequency, regularity and duration of visits to Australia

• purpose of visits to or absences from Australia

• family and business ties with Australia compared to the foreign country concerned; and

• Maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.

Summary of the resides test

The weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning.

In your case, you continued to not be a resident of Australia for tax purposes in the 20VV-WW income year as:

• you have lived in Country A and worked there for over 20 years

• your economic and business ties are stronger in Country A as you have established a business there

• your social connections and activities are significant in Country A and greater than your connections in Australia

• your residential address on our Tax Office system is noted as your Country A address

• for over 20 years, you have spent more time in Country A than Australia in any given financial year. The reason you spent more time in Australia in the 20VV-WW income year was solely due to the ill-health in your family.

• All of your assets are in Country A.

Based on the above, despite spending more time in Australia in the 20VV-WW income year than normal, your behaviour in Country A during the many years you have lived and worked there reflects a degree of continuity, routine and habit that is consistent with residing there.

Therefore, you continue to be a non-resident of Australia under the 'resides' test of residency for the 20VV-WW income year.

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

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

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

In your case you were born in Australia and are a citizen here. Your domicile of origin is in Australia. Although you have been living and working in Country A for several years, you do not have a permanent or long term visa to stay there. As you have not indicated that you will taking any legal steps to change your domicile to Country A, your domicile is in Australia.

As your domicile remains in Australia, you will be an Australia resident 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 you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

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 expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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.

Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia to live overseas ceases to be an Australian resident during the absence.

IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode:

• the intended and actual length of stay in the overseas country

• any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country

• the establishment of a home outside Australia

• the abandonment of any residence or place of abode in Australia

• the duration and continuity of presence in the overseas country, and

• the durability of association with a particular place in Australia.

As highlighted in paragraph 25 of IT 2650, as a broad rule of thumb, a period of about two years or more would generally be regarded as a substantial period for the purposes of a taxpayer's stay in another country. It must be stressed, however, that the duration of the taxpayer's actual or intended stay out of Australia is not, of itself, conclusive and needs to be considered with all of the factors.

In your case you have been living and working in Country A for many years. Although your spouse and children have since returned to Australia for education and health reasons, it is considered that your intention to live in Country A and actions have shown you have established a permanent place of abode outside Australia. This is supported by the following:

• you have a business in Country A

• you have long term accommodation in Country A

• you have social and other ties in Country A

• you have significant personal assets in Country A

• you have been in Country A for several years.

Applying the facts of your situation to the above criteria, you have a permanent place of abode in Country A.

As a result, even though you spent more time in Australia in the 20VV-WW income year than in previous years, you would not be a resident of Australia for income tax purposes under the domicile test. 

The 183-day test

Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that:

• their usual place of abode is outside Australia

• they have no intention to take up residence in Australia

The term 'usual place of abode' is not the same as 'permanent place of abode'. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country.

In your case it can be argued that you have two places of abode, one being the house owned by your spouse in Australian and the other being your house in Country A which you have owned for over 20 years. In view of your long length of stay in Country A and your ties there, we are satisfied that your usual place of abode is in Country A. Whilst you were in Australia for an extended time in the 20VV-WW income year due to the ill-health of your children, you did not form an intention to relocate to Australia in the 20VV-WW income year.

As your usual place of abode is outside Australia and you have no intention of taking up residence in Australia, you will not be a resident of Australia under this test.

The superannuation test

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

A person is a resident under this test if they are:

• a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

• an eligible employee for the purposes of the Superannuation Act 1976; or

• the spouse, or a child under 16, of a person covered by either of the above.

You and your spouse have not been employed by the Commonwealth government. You do not meet any of the other requirements of this test and you are not a resident under the superannuation test.

Summary

You do not satisfy any of the tests for Australian residency. Therefore you are not a resident of Australia for taxation purposes in the 20VV-WW income year.

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).