Edited version of your written advice

Authorisation Number: 1013049288830

Date of advice: 8 July 2016

Ruling

Subject: Residence 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 2017

Year ended 30 June 2018

Year ended 30 June 2019

Year ended 30 June 2020

The scheme commences on

1 July 2016

Relevant facts and circumstances

You have retired from full time work.

Since 20XX, you have been travelling and have spent the majority of your time outside Australia. You anticipate being in Australia for periods from 60 - 120 days at a time, at least once every year.

In the course of these travels, you have undertaken some volunteer work and in that regard purchased a residence in the foreign country in January 20YY.

Your primary motive for the purchase of this residence was to assist with your volunteer work, by allowing you to house people displaced, in that respect the residence sleeps more than 10 people.

You reside at the X-House when in the foreign country.

When you are not in the foreign country, your room at the X-House can be utilised by people.

When in the foreign country, the X-House may be so full that you sub‐rent additional space nearby.

You do not keep substantial personal effects in the foreign country beyond what can be carried in suitcases, although some children's teaching materials (used by the people) may stay in the foreign country when you return to Australia.

It is not known at this stage when your work in the foreign country will be complete or when the X-House will be available for uses other than to house people (among other possibilities, you may sell it, keep it as a holiday house for use for yourself and your family, or rent it out).

Since purchasing the X-House, you have split your time between the foreign country and Australia.

You anticipate spending approximately 8‐10 months in the foreign country and 2‐4 months in Australia every year.

Before leaving Australia, you sold the residence in which you had resided for a number of years.

Your share of the proceeds of the sale (split with your former spouse) were distributed to your adult children, on the condition that you would have a place to stay at each of their homes, and currently you do so when you are in Australia.

Presently, when in Australia, you base yourself at the house of one of your children, (the "Australia House"), where you also keep your remaining personal effects and your motor vehicle.

At present you consider the Australia House to be your home, although you also spend time with your other children and friends in Australia.

At present it is unclear how you will organise your affairs when you return to Australia to live permanently, one possibility is that you will continue to live at the Australia House and your other children's homes on a rotating basis.

Apart from your volunteer work, you have no other family, social or economic ties to The foreign country.

You:

• continue to maintain bank accounts in Australia,

• have not advised your bank that you are a non‐resident,

• continue to maintain your superannuation account in Australia,

• remain enrolled in Medicare,

• remain on the electoral roll,

• direct your mail to the Australia House, and

• have a chronic medical condition which is attended to solely by physicians in Australia.

You were born in Australia to Australian parents, you have lived most of your life in Australia, you are an Australian citizen and have an Australian domicile.

You are not a member of any public sector superannuation scheme established under the Superannuation Act 1990 or an eligible employee within the meaning of the Superannuation Act 1976, and you do not have a spouse who is.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(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 (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 test

• the 183 day test

• the superannuation test.

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 a resident of Australia for tax purposes if they meet 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. 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'.

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 No. IT 2650 Income Tax: Residency - Permanent Place of Abode Outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

In the recent case of Iyengar v. Commissioner of Taxation [2011] ATC 10-222 the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.

You have sold your previous residence, but have a continuity of association with a home in Australia. This home is owned by one of your children, where your personal belongings are kept and where you return to stay when you are in Australia. You also intend to live here permanently once your work in the foreign country ceases.

In addition:

• You are an Australian citizen and have no intention of taking up nationality in any other country.

• Your family and friends predominantly remain in Australia, and your medical treatment continues in Australia.

• Prior to beginning your travels in 20XX, you lived most of your life in Australia,

and once those travels are completed you intend to live the rest of your life in Australia.

• You are present in the foreign country largely to undertake your volunteer work.

• You have no family in the foreign country, and apart from your volunteer work you have no business ties with the foreign country.

• Although you usually reside at the X-House when you are physically present there, when you are not physically present another person may occupy your room.

The fact that you spend a minority of your time in Australia does not preclude you from being an Australian resident under the ordinary concepts test (Iyengar v FCT [2011]).

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

The domicile test

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.

Your domicile is the place considered by law to be your permanent home and usually something more than a residence. You may have no fixed place of abode but under the law you will always have a domicile. You can only have one domicile at the one time, whereas you may be resident in two or more places.

There are three basic types of domicile as established by common law and statutes:

• Domicile by origin, which is attributed to everyone at birth. For example, a nuptial child adopts the domicile of its father, an ex-nuptial child that of its mother.

• Domicile by choice, which will be inferred by law, if there is both a change of residence and an intention of making the change permanently or at least indefinitely. Any person without a legal disability can have a domicile of choice.

• Domicile by operation of law, which is imposed by law.

For example:

• an infant's domicile is that of its parents and changes when the parent's domicile changes,

• a married woman can acquire her own domicile, independent of her husband,

• the age of capacity to have an independent domicile is fixed at;

• 18 years, or

• when the person marries.

If you are a resident who has always lived in Australia you will retain a domicile here when you are absent overseas, unless you choose to permanently migrate to another country.

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.

You have an Australian domicile and have not satisfied the Commissioner that you have established a permanent place of abode overseas.

The 183-day test

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

• your usual place of abode is outside Australia,

• you have no intention to take up residence here.

This test will not apply to your circumstances as you will not be present in Australia for more than half the income year.

The superannuation test

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.

This test will not apply to your circumstances as neither you nor your spouse has been Commonwealth Government employees.

Your residency status

You have satisfied the resides test under section 6-1 of the ITAA 1936 and as such will be a resident of Australia for taxation purposes and assessable in Australia under section 6-5 of the ITAA 1997.

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