Edited version of your written advice

Authorisation Number: 1012765712227

Ruling

Subject: RESIDENCY STATUS

Question

Does the taxpayer reside in Australia within the ordinary meaning of the word for the purpose of the definition of resident in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

No, the taxpayer does not reside in Australia within the ordinary meaning of the word for the purpose of the definition of resident in subsection 6(1) ITAA 1936.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on:

The scheme has commenced

Relevant facts and circumstances

• The taxpayer was born in country Y before 1950.

• The taxpayer has spent the majority of his/her working career and life in country Y.

• The taxpayer met his/her spouse while he/she was working in country Y.

• They married in country Y in 1980.

• The taxpayer is a citizen of country Y.

• Their children are also citizens of that country.

• The taxpayer's spouse is also a Permanent Resident of country Y and has converted to the predominant religion in that country.

• The taxpayer owns two properties in country Y, as well as a vacant block of land.

• The first property has been the family home since 1980.

• The second property is an apartment, also used by the family.

• All valuables and sentimental items, including family photos, are stored in the family home in country Y.

• The taxpayer and his/her spouse applied for and were granted permanent residency in Australia in 19XX.

• While the applicant's spouse worked in Australia, the applicant remained in country Y and his/her children continued their education, visiting his/her spouse in Australia only during the school holidays.

• In 19YY, the taxpayer's spouse applied for and was granted Australian citizenship to facilitate his/her frequent arrivals and departures at Australian airports on business trips.

• However, the taxpayer did not apply for Australian citizenship.

• The taxpayer and his/her spouse stay in the family holiday home in Australia, purchased by his/her spouse in 19WW, when they visit their child who lives and works in Australia.

• This property contains only the basic necessities.

• The taxpayer has three bank accounts in his/her own name in country Y and a bank account held jointly with his/her spouse in Australia.

• The taxpayer and his/her spouse own a car in country Y.

• They have no car in Australia.

• The taxpayer has an extended family of over 500 individuals in country Y.

• The taxpayer does not have an extensive social network in Australia and has no family in Australia apart from his/her child.

• The taxpayer and his/her spouse also belong to various clubs in country Y. The taxpayer belongs to a yacht club in Australia.

• The taxpayer also supports various charities in country Y and none in Australia.

• The taxpayer has a GP in country Y and has visited the same clinic for some 40 years.

• The applicant does not have a regular GP in Australia but attends the local medical clinic if required.

• The taxpayer wishes to be buried in country Y.

Following is a summary of days the taxpayer and his/her spouse were present in Country Y during the country Y tax year.

Y tax year ended 31 December	Days spent in Country Y
2014	153
2013	111
2012	141
2011	195
2010*	72
2009	220
2008	220
2007	211
2006**	150
2005	246

*In 20ZZ the taxpayer's child started a degree in an Australian university and the taxpayer and his/her spouse were present in Australia assisting their child settling in to the course.

**The taxpayer and his/her spouse also spent 150 days in country X settling their child into new accommodation and a university course in country X.

Following is a summary of days the taxpayer and his/her spouse were present in Australia during the Australian tax year.

Australian tax year ended 30 June	Days spent in Australia
2015 - from 1 July 2014 to 31 December 2014	126
2014	162
2013	146
2012	149
2011	139
2010*	169
2009	70
2008	94
2007	88
2006	73
2005	110

*Once the taxpayer's child started his/her studies in Australia in February 20ZZ the taxpayer and his/her spouse began to holiday in Australia more regularly to visit their child. However, their presence in Australia has not exceeded 169 days in any Australian tax year ended 30 June.

You consider that the taxpayer's behaviour in country Y is consistent with a person residing in country Y and not residing in Australia. That is to say the weight of evidence in favour of residing in country Y (i.e. family, home, lifestyle, assets, friends, doctor, social activities, habits etc.) far outweigh the factors of on-going but insignificant ties to Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

An 'Australian resident' is generally assessable on ordinary and statutory income derived from all sources, whether in or out of Australia, during the income year, respectively under sections 6-5(2) and 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997). In contrast, a 'non-resident' is generally assessable only on ordinary and statutory income derived from all Australian sources during the income year, respectively under sections 6-5(3) and 6-10(5) of the ITAA 1997.

The term 'Australian resident' is defined in section 995-1 of the ITAA 1997 to mean 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' are defined in subsection 6(1) of the ITAA 1936 to mean:

(a) a person, other than a company, who resides in Australia and includes a person-

(i) whose domicile is in Australia, unless the Commissioner is satisfied that his/her permanent place of abode is outside Australia;

(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his/her usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or

(iii) who is:

A. a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

B. an eligible employee for the purposes of the Superannuation Act 1976; or

C. the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); and …

Effectively, if a person does not reside in Australia, commonly referred to as 'residence according to ordinary concepts' that person may nevertheless be considered a resident of Australia if he or she satisfies any one of three additional statutory tests set out in paragraphs 6(1)(a)(i) to 6(1)(a) (iii) of the ITAA 1936. Simply stated, these tests are: (i) the domicile and permanent place of abode test; (ii) the 183 day test; and (iii) the superannuation fund test.

Residency for income tax purposes

The question of a taxpayer's residence is to be decided on a year-by-year basis so as to determine the taxpayer's annual liability to Australian income tax.

Both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident in a country for a particular year.

In Commissioners of Inland Revenue v. Lysaght [1928] A.C. 234, it was held that a decision on a question of 'residence' was a finding of fact. i.e., it is essentially a question of fact whether a person does or does not come within the meaning of that expression and that there is no technical or special meaning attached to the expression for the purposes of the Income Tax Act. Following this, the judgment by the High Court of Australia in Commissioner of Taxation v Miller [1946] HCA 23; 73 CLR 93 ('Miller') is considered as decisive in illustrating the way in which the question of "resident" or "not resident" has become a "question of degree and therefore of fact".

In the present circumstances, the Taxpayer's 'residence' in each of the related income years will be determined separately with relevance to the Taxpayer's individual circumstances in those years including regard to the taxpayer's prior and subsequent history.

The ordinary concepts test

It was held in Miller that the primary test for deciding the residency status of an individual, for Australian income tax purposes, is whether the individual 'resides' in Australia. The term 'reside' is not defined in Australian income tax law and consequently it takes its ordinary meaning. The Macquarie Dictionary 5th Ed. (2009) defines 'reside' as 'to dwell permanently or for a considerable time, have one's abode for a time'.

Whether a person 'resides' in a particular country is a question of fact and degree.

Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia (TR 98/17) contains the Commissioner's interpretation of the ordinary meaning of the word 'resides' (within the definition of resident in subsection 6(1) of the ITAA 1936). TR 98/17 takes into account a number of factors relevant to the question of residency in relation to individuals entering Australia including migrants, visitors, students and academics.

TR 98/17 at paragraphs 42 to 63 provides a detailed examination of the factors that may indicate that individuals are residing in Australia, as listed below:

• Intention or purpose of presence;

• Family and business/employment ties;

• Maintenance and location of assets; and

• Social and living arrangements.

The period of a person's physical presence in Australia is not necessarily determinative of residency but it is an important factor when considering whether an individual resides here.

Current circumstances

Intention or purpose of presence

• The taxpayer has spent the majority of his/her working life in country Y.

• The taxpayer is a citizen of country Y, his/her spouse is a permanent resident of country Y and their children are citizens of country Y.

• The taxpayer and his/her spouse applied for and were granted permanent residency in Australia in 19XX.

• While the applicant's spouse worked in Australia for a specific period, the applicant remained in country Y and his/her children continued their education, visiting his/her spouse in Australia only during the school holidays.

• In 19YY, the taxpayer's spouse applied for and was granted Australian citizenship to facilitate his/her frequent arrivals and departures at Australian airports on business trips.

• However, the taxpayer did not apply for Australian citizenship.

• Since 20ZZ, the taxpayer and his/her spouse have visited Australia regularly on holiday to visit their child who lives and works here.

• On these visits, they stay in the family holiday home in Australia, purchased by his/her spouse in 19WW, when they visit their child who lives and works in Australia. This property contains only the basic necessities.

Family and business/employment ties

• The taxpayer has an extended family of over 500 individuals in country Y.

• His/her child lives and works in Australia.

Maintenance and location of assets

• The taxpayer's spouse bought a property in Australia in 19WW, which now serves as a holiday home when they visit their child who lives and works here. This property contains only the basic necessities.

• The taxpayer owns the family home and another property in country Y. All valuables and sentimental items, including family photos, are stored in the family home in country Y.

• The taxpayer and his/her spouse own a car in country Y and have no car in Australia.

• The taxpayer has a bank account in his own name in country Y and a bank account held jointly with his/her wife in Australia.

Social and living arrangements

• The taxpayer has an extended family of over 500 individuals in Country A.

• The taxpayer does not have an extensive social network in Australia and has no family in Australia apart from his/her child.

• The taxpayer and his/her spouse also belong to various clubs in country A.

• The taxpayer belongs to a yacht club in Australia.

• The taxpayer also supports various charities in Country Y and none in Australia.

• The taxpayer's doctor is in Country Y.

• The taxpayer does not have a regular GP in Australia but attends the local medical clinic if required.

• The taxpayer wishes to be buried in Country Y.

We also note that once the taxpayer's child started their medical studies in Australia in 20ZZ the taxpayer and his/her spouse began to spend more time in Australia, taking holidays here to visit their child. However, their presence in Australia has not exceeded 169 days in any Australian tax year ended 30 June. In most cases, we accept that a visit to Australia of less than six months is not sufficient time to be regarded as residing here (paragraph 62 of TR 98/17). Over some fifty years, the taxpayer and her/his wife have also spent the majority of their time in country Y and consider country Y to be their home.

Conclusion

We consider, having regard to these factors, that the taxpayer's behaviour in country Y is consistent with a person residing in country Y and not residing in Australia. That is to say the weight of evidence in favour of residing in country Y (i.e. family, home, lifestyle, assets, friends, doctor, social activities, habits etc.) far outweigh the factors of on-going but insignificant ties to Australia.

In these circumstances, the taxpayer does not reside in Australia within the ordinary meaning of the word for the purpose of the definition of resident in section 6(1)(a) of the ITAA 1936.

Furthermore, given that the taxpayer and her/his spouse are both domiciled in Country Y and do not have Australian domicile, the taxpayer does not fall within the extended definition of resident of Australia under the 'domicile and permanent place of abode test' contained in subparagraph 6(1)(a)(i) of the ITAA 1936. Nor do subparagraphs 6(1)(a)(ii) and (iii) apply. (Also, in most cases, if an individual is not residing in Australia under ordinary concepts, their usual place of abode is outside Australia (see paragraph 37 of TR 98/17).