Edited version of private advice

Authorisation Number: 1012658342533

Ruling

Subject: Residency for taxation purposes

Question and answer:

Are you a resident of Australia for taxation purposes from the time you obtained a permanent residence visa?

No.

This ruling applies for the following period:

1 July 20XX to 30 Jun 20YY.

The scheme commenced on:

1 July 20XX.

Relevant facts and circumstances:

You were born and raised in another country.

You have a high level position with an overseas company located in your country of birth.

You are remunerated by the overseas company.

You have no intentions to cease your employment with the overseas company.

You have a residence in the country of your birth.

You also maintain significant assets in your country of birth.

You lodge income tax returns in your country of birth and will continue to do so in future years unless your circumstances change.

You applied to migrate to Australia and first arrived several years on a temporary migration visa with your spouse and children.

You established a home for your family in Australia when you first arrived.

In 20ZZ you were issued a Business Skills Category (BSC) visa that allows you to reside permanently in Australia as a business migrant.

You are not employed in Australia.

You are the Director of a company in Australia that is no longer trading.

Your only income from Australian sources is interest on bank deposits.

Since coming to Australia you have travelled regularly between an Australian city and your country of birth.

When you are in Australia you reside with your family.

When you are in your country of birth you reside at your residence in that country.

You have spent more than 183 days in your country of birth in every financial year since you first arrived in Australia.

You do not intend to spend more than 183 days in Australia in any of the financial years between now and 30 June 20YY.

You intend to continue to work in your country of birth to support your family in Australia.

You have not formed an opinion as to whether you wish to reside and settle permanently in Australia.

Your family connections in your country of birth include a child and your extended family.

In your country of birth you also have continued close contact with friends and remain engaged in traditional cultural interests.

In Australia, your family connections are your spouse and children.

You have a limited social network in Australia.

Relevant legislative provisions:

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

Income Tax Assessment Act 1936 Section 6(1).

Reasons for decision

Residency for taxation purposes

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. The tests are:

• the resides test,

• the domicile 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 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 it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law.

Taxation Ruling IT 2681 - Income tax: residency status of business migrants provides guidance for determining the residency status for tax purposes of a person who comes to Australia under a visa issued under the BSC class of visas and provides several examples as to when a business migrant might be considered a resident of Australia for taxation purposes.

Example 1 from Taxation Ruling IT 2681 is reproduced in part below.

Example 1

36. Facts: Mr Lee and his family are granted resident visas to migrate to Australia under the Business Migration Program. After his arrival in Australia, Mr Lee purchases a house to provide accommodation for his family. Mr Lee's wife and children reside in Australia for the full financial year, where the children are currently attending secondary school.

Mr Lee remains an active partner in a firm based in Hong Kong even after migrating to Australia, and is required to return to Hong Kong for considerable lengths of time. During his periods of absence from Australia, Mr Lee resides in a second family home in Hong Kong.

He has substantial investments in Hong Kong and maintains close contact with his relatives and friends there and with sporting and cultural interests there. He makes regular visits to Australia to see his family. During the 1990-91 year of income, Mr Lee spent 150 days in Australia.

At the end of the year of income, he had still not commenced establishing a business in Australia.

Mr Lee has not formed an opinion whether he wishes to reside and settle permanently in Australia.

Result: On the basis of these facts, Mr Lee for the 1990-91 income year is not a resident of Australia for taxation purposes.

Having considered the facts of your case, we consider your circumstances are similar to those of the taxpayer in the example cited above. Accordingly, we do not consider that you have been residing in Australia for taxation purposes since you obtained your permanent residence visa in 20ZZ, nor can we conclude that you will be residing in Australia for taxation purposes between now and 30 June 20YY.

Accordingly, and unless there is a change in your circumstances, we do not consider you will be a resident of Australia for taxation purposes under the resides test between dd/mm/yyyy and 30 June 20YY.

The domicile test

Under this test, a person whose domicile is in Australia will be a resident of Australia for taxation purposes.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin' and will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice but to do so, a person must have an intention to make their home indefinitely in a country outside their domicile of origin.

Your domicile of origin is outside of Australia and it cannot be said that you have obtained a domicile of choice in Australia because, even though you have been granted a visa that allows you to reside permanently in Australia, you have not been residing permanently in Australia since you first arrived here and you have stated you have not formed an opinion whether you wish to reside and settle permanently in Australia.

Based on the facts you have provided we consider that you will not be a resident of Australia under the domicile test between dd/mm/yyyy and 30 June 20YY.

The 183-day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

Taxation Ruling TR 98/17 - Income tax: residency status of individuals entering Australia specifies that in most cases, if an individual is not residing in Australia under the resides test, their usual place of abode is outside Australia.

You have spent more than 183 days in your country of birth in every financial year since you first arrived in Australia and have stated that you do not intend to spend more than 183 days in Australia in any of the financial years between now and 30 June 20YY.

Accordingly, and based on the facts you have provided, you will not be a resident of Australia under the 183 day test between dd/mm/yyyy and 30 June 20YY.

The superannuation test

Based on the facts you have provided this test is not relevant in your situation as it only applies to persons eligible to contribute to the superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years.

Conclusion - your residency status

Based on the facts you have provided, you will not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 between the time you obtained your permanent residence visa on dd/mm/yyyy and 30 June 20YY. Accordingly, you will not be a resident of Australia for taxation purposes during that time.