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Ruling

Subject: Residency

Question

Are you an Australian resident for income tax purposes?
Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2012
The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are a citizen of Country A.

Your country of origin is Country A.

You have visited Australia on a few occasions.

The first two occasions were on tourist visas in earlier income years (for approximately one month each time).

You arrived in Australian for the third time in this income year and you were holding a Permanent Residency visa.

You were required to enter Australia by a certain date under the terms of your visa.

During your third visit to Australia you established bank accounts, undertook sightseeing activities and visited friends.

You departed Australia less than 183 days after arriving due to medical reasons.

You have been in Country A since this time receiving medical treatment.

You require further medical treatment.

You plan to return to Australia in the near future.

You intend to come to Australia as soon as your doctors advise that it is safe for you to travel.

You stayed with your child at their home on each occasion you have visited Australia.

It is your intention to live permanently in Australia.

You have obtained an ABN.

You transferred $X amount into your Australian bank account.

You do not own a home in Country A. You live in a house in Country A belonging to your children. This house is intended to be sold when you return to Australia.

This house was not being rented out during your time in Australia.
You have no children or close relatives close to you in Country A.

You do not have a bank account in Country A. You closed your bank account in Country A when you obtained an Australia Permanent Residency visa.

You are over 16 years of age.
Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1(1).

Income Tax Assessment Act 1936 Subsection 6(1).
Reasons for decision

Residency for taxation purposes - general

The criteria for determining residency for tax purposes are not the same as the criteria used by the Department of Immigration and Multicultural Affairs. The visa notation is not the only consideration in determining residency for tax purposes, as all the facts surrounding the individual's presence need to be taken into account.

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes 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:

· the resides test,

· the domicile (and permanent place of abode test),

· the 183 day test, and

· the superannuation 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. If residency is established under the resides test, the remaining three tests do not need to be considered.

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'.

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 period of time that an individual spends in Australia is not, by itself, decisive in determining a person's residency status. In most cases, however, the Commissioner accepts that a visit to Australia of less than six months is not sufficient time to be regarded as establishing residency. In your case, you were present in Australia for less than 183 days. You have not yet dwelt in Australia permanently or for a considerable period of time.

To determine whether an individual resides in Australia, their period of physical presence in Australia and the quality and character of their behaviour while in Australia needs to be considered. It needs to be considered whether their behaviour over a significant period of time in Australia reflects a degree of continuity, routine or habit that is consistent with residing in Australia.

Your length of physical presence in Australia during the income year and the surrounding circumstances are not consistent with residing in Australia. During your time in Australia you did not establish a regular routine or habit with regards to day-to-day activities. You stayed with your child in their house, and although you established a bank account and an ABN, your behaviour, which included sight-seeing and visiting friends, is likened more to that of a tourist than of a resident.

Accordingly, you are not considered to be residing in Australia and, therefore, are not a resident of Australia under the resides test during the income year in question.

The domicile and permanent place of abode test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied that his permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's domicile of origin. A person's domicile of origin will not usually change but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.

We consider that your domicile of choice became Australia when you became a permanent resident of Australia. However, you are currently residing in Country A. Therefore we need to consider your 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 a permanent place of abode elsewhere.

In your case, you continue to live in a house which belongs to your children in Country A. This house is not intended to be sold until you have returned to Australia permanently, and no action was taken to commence the process of selling the house when you came to Australia in this income year. We consider this is your permanent place of abode.

Considering the above information we consider that you have a permanent place of abode overseas, and accordingly consider that you are not a resident of Australia for taxation purposes under the domicile test.

The 183-day test

Where a person is present in Australia for 183 days or more (i.e. half of the income year) during an income year, the person will be a resident of Australia for taxation purposes 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 will not be a resident of Australia for taxation purposes under this test because you were in Australia for less than 183 days during the income tax year, which does not meet the 183 day test.

The superannuation test

Under this test, an individual will be considered a resident of Australia for taxation purposes if:

1. they are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990,

2. they are an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976, or

3. they are the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

In your case, you are over 16 years of age. You have never been a member of the PSS and you are not an eligible employee in respect of the CSS. You do not have a spouse who is a member of the PSS or an eligible employee for the purposes of the CSS.

Accordingly, you are not a resident of Australia for taxation purposes under this test.

Conclusion - your residency status