Edited version of your written advice

Authorisation Number: 1051277696304

Date of advice: 15 September 2017

Ruling

Subject: Residency

Question 1

Were you a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 during the year ending 30 June 2017?

Answer

Yes

Question 2

Will you be a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 during the year ending 30 June 2018?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2017

Year ending 30 June 2018

The scheme commences on:

1 July 2016

Relevant facts and circumstances

1. Your domicile of origin is Australia throughout the years ending 30 June 2017 and 30 June 2018.

2. In the years ending 30 June 2016 and earlier, you were an Australian resident for tax purposes.

3. In the year ending 30 June 2017, you left Australia for an indefinite period. While overseas, you will travel extensively and spend time in a number of different countries. You will not remain in any particular country for a long continuous period of time.

4. You will return to Australia during the ruling period for both business and family reasons.

5. You have sold some of your major Australian assets but retained others, including the property that was your primary place of residence in Australia.

6. Your spouse lives overseas, and you have adult children living in both Australia and overseas.

7. Neither you nor your spouse 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.

8. You spent more than 183 days in Australia during the year ending 30 June 2017.

9. You will spend fewer than 183 days in Australia during the year ending 30 June 2018.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Question 1

10. The statutory definition of resident is set out in paragraph 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) and, in respect of individuals, states that:

resident or resident of Australia means:

(a) a person, other than a company, who resides in Australia and includes a person:

(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia;

(ii) who has actually been in Australia, continuously or intermittently, during more than one‑half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or

(iii) who is:

(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

(B) an eligible employee for the purposes of the Superannuation Act 1976; or

(C) the spouse, or a child under 16, of a person covered by sub‑subparagraph (A) or (B)

11. The above definition provides four tests for determining whether an individual is a resident for income tax purposes. These are: (a) residence according to ordinary concepts; (b) the domicile test; (c) the 183 day test; and (d) the Commonwealth superannuation fund test.

12. The tests that are relevant to your circumstances are tests (a) to (c).

13. You do not satisfy test (d), as neither you nor your spouse have a relevant interest in a Commonwealth superannuation fund.

14. Where a person resides in Australia under ordinary concepts, Australian residency is established and the other tests need not be considered: FCT v Applegate 79 ATC 4307; (1979) 9 ATR 899 (Applegate); paragraph 12 of Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia (TR 98/17).

15. As there is no definition of the word ‘reside’ in Australian income tax law, the ordinary meaning of the word must be considered. The Macquarie Dictionary defines ‘reside’ as ‘to dwell permanently or for a considerable time; have one's abode for a time’, and the Shorter Oxford English Dictionary defines it as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place'.

16. Whether a person is a resident of Australia is a question of fact and degree to be determined having regard to the circumstances of the particular case (see FCT v Miller (1946) 73 CLR 93 at 101 per Rich J). Residency is determined by considering all of the evidence and balancing the facts and circumstances and determining if the taxpayer’s behaviour is consistent with the ordinary meaning of ‘resides’. The test is whether the person has retained a ‘continuity of association’ with the place, coupled with an intention to return to that place and an attitude that it remains home (see Hafza v Director-General of Social Security (1985) 6 FCR 444 at 449 per Wilcox J).

17. In Re Iyengar and FCT [2011] AATA 856 (Iyengar), Senior Member Walsh identified a number of factors that the courts have taken into account when determining a taxpayer’s residence according to ordinary concepts, namely physical presence; nationality; history of residence and movements; habits and mode of life; frequency, regularity, and duration of visits; purpose of visits to or absences from a country; family and business ties with a country; and maintenance of a place of abode. While not exhaustive, this contains a useful list of factors to consider.

18. On examination of the facts and circumstances of your case, you are considered to have been ordinarily resident in Australia during the year ending 30 June 2017.

19. As you are considered to have been resident in Australia according to ordinary concepts, it is unnecessary to consider the three additional statutory tests for residency.

Question 2

20. As noted in Question 1, the definition of ‘resident’ in subsection 6(1) of the ITAA 1936 contains four tests, namely: (a) residence according to ordinary concepts; (b) the domicile test; (c) the 183 day test; and (d) the Commonwealth superannuation fund test.

21. The tests that are relevant to your circumstances are tests (a) to (c).

22. You do not satisfy test (d), as neither you nor your spouse have a relevant interest in a Commonwealth superannuation fund.

Residence according to ordinary concepts

23. The legal tests for residency are set out above in Question 1. As above, the question of whether you are considered to reside in Australia according to ordinary concepts will be determined having regard to the facts and circumstances.

24. Your behaviour during the year ending 30 June 2018 does not reflect a degree of continuity, routine or habit that is consistent with residing in Australia. Therefore, you will not be considered to reside in Australia under ordinary concepts.

Domicile test

25. Subparagraph (a)(i) of the definition of ‘resident of Australia’ includes a person whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia.

26. Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia (IT 2650) sets out the Commissioner’s view on the application of this test.

27. Your domicile of origin is Australia, and you will retain your domicile of origin throughout the year ending 30 June 2018. You will therefore be a resident of Australia under this statutory test unless the Commissioner is satisfied that you have a permanent place of abode outside Australia.

28. Paragraph 12 of IT 2650 cites the cases of R v Hammond (1852) 117 ER 1477 at 1488; Levene v IRC (1928) AC 217 and IRC v Lysaght (1928) AC 234 to conclude that:

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.

29. To fall within this statutory test the ‘place of abode’ must have the character of being ‘permanent’. The leading case on whether a taxpayer has their permanent place of abode outside Australia is FCT v Applegate 79 ATC 4307; (1979) 9 ATR 899 (Applegate). In Applegate (79 ATC at 4317; 9 ATR at 910-911), Fisher J provided the following statement on the determination of whether a taxpayer has a permanent place of abode in a particular location:

It follows that it is in my view proper to pay greater regard to the nature and quality of the use which a taxpayer makes of a particular place of abode for the purpose of determining whether it qualifies as his permanent place of abode. His intentions with respect to the duration of his residence is just one of the factors which has relevance. Obviously if his stay is purely temporary and he intends to move on or return to Australia at some definite point of time this denies the place of abode an essential characteristic of a home, namely durability. Moreover it seems appropriate to view objectively the nature and quality of the use which the taxpayer makes of the place of abode to determine whether it has the characteristics of his fixed place of abode, his home. It is to my mind perfectly consistent with the establishing of a home in a particular place that the taxpayer is aware that the duration of his enjoyment of the home, although indefinite in length, will be only for a limited period. The knowledge that eventually he will return to the country of his domicile does not in my opinion deny him a capacity to make his home outside of his country of domicile. Such a conclusion is particularly open in the present circumstances where the taxpayer was not a completely free agent in the choice of when to return, it being a matter for negotiation between him and his employers.

To my mind the proper construction to place upon the phrase ‘permanent place of abode’ is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.

30. In Landy and FCT [2016] AATA 754 at paragraphs 21 and 22, Senior Member O’Loughlin summarised the conclusions in Applegate regarding when an abode meets the statutory description of a ‘permanent place of abode’ as follows:

[21] To determine whether a place of abode is a permanent place of abode it is necessary to have regard to the nature and quality of the use made of that place, the continuity or otherwise of the [person’s] presence, the duration of [his/her] presence and the durability of [his/her] association with the particular place. Greater weight should be given to these factors than to … a person’s stated intentions. This is an objective analysis. A permanent place of abo[d]e is a fixed and habitual place of abode without needing to be a permanent home.

[22] A permanent place of abode outside Australia is not the same as a temporary or transitory place of abode outside Australia. [Citations omitted.]

31. Paragraph 23 of IT 2650 sets out the following factors that the Commissioner considers to be relevant in determining whether a taxpayer has a permanent place of abode outside Australia:

(a) the intended and actual length of the taxpayer's stay in the overseas country;

(b) 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;

(c) 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;

(d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(e) the duration and continuity of the taxpayer's presence in the overseas country; and

(f) the 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 allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

32. To satisfy the exception to the domicile test, the Commissioner must be satisfied that you have a permanent place of abode outside Australia. The facts do not demonstrate an enduring connection with a particular place of abode outside Australia such that it could be considered to be your permanent place of abode. Therefore, you will be considered to be a resident of Australia under this arm of the residency test in subsection 6(1) of the ITAA 1936.

33. Based on the facts of your case, the Commissioner is not satisfied that you have a permanent place of abode outside Australia. You therefore do not satisfy the exception to the domicile test and will be considered to be a resident of Australia under this arm of the residency test in subsection 6(1) of the ITAA 1936.

The 183 day test

34. During the year ending 30 June 2018, you will be in Australia for fewer than 183 days, therefore you will not be considered a resident of Australia under the 183 day test for the year ending 30 June 2018.

Conclusion

35. You will be considered a resident of Australia for the year ending 30 June 2018 under the domicile test, as the facts do not demonstrate that you have a permanent place of abode outside Australia.

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