Edited version of private advice

Authorisation Number: 1012623175351

Ruling

Subject: Residency for tax purposes

Question and answer

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on:

1 July 2013

Relevant facts and circumstances

You were born in, and are a citizen of, Australia.

You departed Australia several years ago, prior to this you were living permanently in Australia.

Several years ago you formed the intention to make your home indefinitely outside Australia.

Prior to your departure from Australia, you lived with your parents.

You departed Australia with the intention of living and studying in the Country X.

You later moved to Country Y to live with your spouse who is a Country Y citizen.

While in Country Y you were studying and looking for employment.

You held a working holiday visa followed by a partnership visa. You lived in rental accommodation with your spouse.

In the relevant income year, you moved to Country Z to undertake full time study. You intend to remain in Country Z until you complete your study in several years' time.

You hold a student visa which you must renew every twelve months. The cost of the visa is reimbursed to you by the university. You are permitted to work up to 20 hours a week during term time and full time during the holidays.

Your spouse has accompanied you to Country Z.

You live in rental accommodation with your spouse.

The university pays your fees and in addition pays you a stipend.

You do not know if or when you intend to return to Australia.

You have come back to Australia once since your departure, for a short holiday.

Your only assets are household effects and a bank account with a Country Z bank.

You have other household effects in storage with your parents in Australia, and an Australian bank account.

Your name has been removed from the Australian electoral roll.

You have not advised Medicare to have your name removed from their records.

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, and

• 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 considered to 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

• whether the person is physically present in that country at some time during the year of income

• the history of the person's residence and movements

• if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

• if the person is outside the country for part of the relevant income year, the purpose of the absences

• the family and business ties which the person has with the particular country, and

• whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

In your case, you have been living outside of Australia for a number of years and formed the intention to make your home indefinitely outside of Australia. You are currently living and studying in Country Z on a renewable student visa. You live with your spouse who is a Country Y citizen. You are therefore not residing in Australia according to the ordinary meaning of the word.

As you are not residing in Australia, you are not a resident under the resides test.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

In your case, you were born in and are a citizen of Australia. You have not shown that you have changed your domicile and therefore your domicile remains 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 (paragraph 12 of IT 2650).

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 you in the meantime setting up a permanent place of abode elsewhere (paragraph 14 of IT 2650).

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

In your case, the Commissioner is satisfied that you have set up a permanent place of abode outside of Australia, as you intend to remain living outside of Australia indefinitely and you live in rental accommodation in Country Z with your spouse.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here.

In your case, you have not been, and will not be, present in Australia for more than 183 days in any income year and therefore you are not a resident under the 183 day test.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees.

As you have never been a Commonwealth government of Australia employee, you are not a resident under the superannuation test.

Your residency status

As you do not meet any of the above tests, you are not a resident of Australia for tax purposes.

As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.