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Ruling
Subject: Residency
Question and answer:
Are you a resident of Australia for income tax purposes?
No.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on:
1 July 2011
Relevant facts and circumstances
You and your spouse are citizens of both Australia and country X.
You are both retired professionals.
You have lived in Australia for a number of years.
You will return to Australia for the winter.
You and your spouse have sold your property in Australia and have purchased a home in country X.
You no longer have any property in Australia.
You have assets overseas and in country X.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Income tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Subsection 995-1(1)
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non-resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.
Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purpose 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. These tests are:
1. the resides test
2. the domicile test
3. the 183 day test
4. the superannuation test
The first two tests are examined in detail in Taxation Ruling IT 2650: Residency - Permanent Place of Abode outside Australia.
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 considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.
The resides test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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 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.
In your case you left Australia to live in country X. You are therefore not residing in Australia according to ordinary concepts and you are not a resident of Australia for tax purposes according to this test.
The domicile test
If a person has their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.
Domicile
There are essentially 3 types of domicile that an individual can have:
§ the domicile of origin;
§ the domicile of choice; and
§ the domicile of dependency.
Basically, the domicile of origin of an individual is where the individual was born. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.
You and your spouse moved to Australia a number of years ago. You have dual citizenship with Australia and country X.
Your domicile of choice is therefore 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 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.
In your case:
§ you moved to country X to live,
§ you have purchased a house in country X,
§ you have sold your Australian property and
§ you have family in country X.
The Commissioner is satisfied that you have established a permanent place of abode in country X.
You are not a resident under this test.
The 183 day test
When a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.
You have not returned to Australia for more than 183 days since leaving Australia.
You do not intend to return to Australia for more than 183 days in any future financial years.
You are not a resident under this test.
The superannuation test
An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. This test is not applicable. Therefore, you are not a resident of Australia under this test.
Your residency status
You are a non-resident of Australia for taxation purposes.
You are required to declare any income derived in Australia in your Australian tax return.