Edited version of your private ruling

Authorisation Number: 1012590558475

Ruling

Subject: Residency

Question and answer

1. Are you a resident of Australia for taxation purposes?

No.

2. Are you required to declare your Australian source income in your Australian tax return?

Yes.

This ruling applies for the following periods

Year ended 30 June 2011

The scheme commences on

1 July 2010

Relevant facts and circumstances

You were born in Country Y

You are a citizen of both Country Y and Australia.

You became an Australian citizen a number of years ago.

You have worked in many countries.

You have had various long term and short term contracts overseas.

You are able to enter overseas union countries on your Country Y passport and you are able to stay permanently in any of the countries in the union.

You left Australia to commence work in various countries.

You formed the intention to leave Australia on a permanent basis.

Since leaving Australia you have made regular trips back to Australia mainly at Christmas to visit your family.

You purchased a flat in Country Z a number of years ago.

This property is your residence and you have no other properties anywhere else in the world.

Since purchasing the residence in Country Z, Country Z has been your base.

You have had to arrange all your own accommodation while working in other countries.

You have a credit union account outside Australia, country Z and Country X bank accounts.

You have not spent more than 183 days in a financial year in Australia since leaving.

You took a contract in Australia which was non ongoing.

You rented a residence during this contract in Australia on a month by month basis.

You resigned this position and took up work in Country X.

You have no assets in Australia other than a bank account.

You do not have a spouse and you do not have any dependants.

You are no longer eligible to contribute to your Australian Government super fund.

You are over the age of 16.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:

(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 with Australia compared to the foreign country concerned; and

(viii) maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive.

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.

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.

Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62):

Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1.

In your case you left Australia a number of years ago to work overseas.

You formed an intention to live permanently overseas after leaving.

You have returned to Australia on a regular basis for no more than 183 days at a time to visit your family.

You took up a non-ongoing contract in Australia.

(ii) Nationality

You were born in Country Y and you are a citizen of both Country Y and Australia.

(iii) History of residence and movements

You left Australia a number of years ago and lived and worked overseas.

You returned to work in Australia and resigned this position to take up another position in Country X.

You have returned to Australia to visit family on a regular basis since leaving Australia.

(iv) Habits and 'mode of life'

You have lived and worked outside Australia for a number of years. You formed an intention to live permanently outside Australia.

You purchased a home in Country Z.

You have returned on a regular basis since leaving Australia to visit your family.

(v) Frequency, regularity and duration of visits to Australia

You have returned to Australia on a regular basis since leaving to visit your family.

(vi) Purpose of visits to and absence from Australia

You left Australia to live and work.

(vii) Family, business and financial ties

Family

Your family lives in Australia.

You have no spouse or dependants.

Business or economic

You have been working outside Australia for a number of years.

Assets

You have a bank account in Australia.

Your assets overseas include a home in Country Z, bank accounts in country X and Country Z, and an overseas credit union account.

You have a higher value of assets outside Australia.

(viii) Maintenance of a place of abode in Australia

You do not have any properties in Australia.

Summary of the resides test

As mentioned above, 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.

You left Australia to live and work overseas.

You have a higher value of assets overseas than in Australia.

You only return to Australia to visit family for short periods not exceeding 183 days in any one financial year.

You returned for a short period to take up a non ongoing contract in Australia.

Based on the above, you have not retained a continuity of association with Australia while you have been living and working overseas and you will not be residing in Australia according to the ordinary meaning of the word.

Therefore, you are not a resident of Australia under the 'resides' test of residency.

The domicile test

If a person is considered to have 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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. Your domicile of origin is Country Y.

A domicile of choice is adopted when you become a citizen of a new country or apply for permanent residency in a new country. Your domicile of choice is Australia as you are a citizen of Australia and had been living here prior to going to overseas to work.

You reactivated your Country Y domicile when you commenced living and working overseas.

Therefore your domicile is Country Y.

You are not a resident under this test.

The 183-day test

When a person is present in Australia for 183 days or more 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 are not a resident under this test as you have not been in Australia for 183 days or more in a financial year.

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.

Only Commonwealth Government employees are eligible to contribute to the CSS and PSS.

You are no longer eligible to contribute to a Commonwealth Super fund. You are over the age of 16 years.

You are not a resident under this test.

Your residency status:

You were not a resident of Australia for the period you were working in Australia..

Assessable income

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. 

As a non-resident of Australia for taxation purposes you are required to declare your Australian sourced income for the period you were working in Australia in your Australian tax return.