Edited version of your written advice

Authorisation Number: 1012804872339

Ruling

Subject: Residency

Question and Answer

Were you a resident of Australia for taxation purposes in the financial year ended 30 June Z?

No

This ruling applies for the following periods:

Year ended 30 June Z

The scheme commences on:

1 July 20YY

Relevant facts and circumstances

You were born in Country X.

You first came to Australia in 200U as an overseas student. You became a permanent resident in 200V.

You are an Australian citizen.

You and your spouse departed for Country X in November 200W.

You made several trips to Australia during 200X to 20TT. You did not spend more than 50 days in Australia on these trips.

Your spouse and children moved back to Australia in August 20YY. They lived in Australia for several months.

You accompanied your family to Australia in August 20YY. The purpose for this trip was to help your family settling down.

You had less than 5 short trips (less than 90 days in total) to Australia during the Z financial year. The purposes for these visiting were to visit your family.

You spouse and children returned to Country X in November Z.

You have a share trading account in Australia.

You maintain a bank account in Australia.

You own a residential property in Australia and have no mortgage against it. Your family lived in this property when they were in Australia.

You purchased a residential property in Country X in 20BB. You have been living in this property since then; you did not rent it out during your trips to Australia.

You own a commercial property in Country X.

You have a share trading account in Country X.

You have credit cards in Country X; you do not have credit cards in Australia.

You have a permanent job in Country X and your role is general manager. You have been working for your parent since 200W; your parent will transfer the company to you.

You have advised the Australian Electoral Office to have your name removed from the electoral roll.

You have advised Medicare to have your and your family's name removed from their records.

You and your spouse are not Commonwealth Government of Australia employees for superannuation purposes.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1997 Subsection 6-5(3)

Reasons for decision

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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 (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 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 may still be considered to be a resident of Australia for taxation 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. 3rd 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 question of whether an individual 'resides' in a particular country is a question of fact and degree and all the circumstances of the taxpayer are taken into account in arriving at a decision.

In your case, there are various factors that indicate that you are no longer residing in Australia. Specifically:

• you moved back to Country X in November 200W, you have been living in Country X since then;

• you have established your own accommodation in Country X;

• you have a permanent job in Country X;

• you intend to live and work in Country X indefinitely;

• your main financial assets are in Country X.

Based on the information provided, it is considered that you are not residing in Australia according to the ordinary meaning of the word.

Therefore, you were not a resident of Australia for taxation purposes under this test in the financial year ended 30 June Z.

The domicile test

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

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country.

The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

In your case, you were born in Country X; therefore, your domicile of origin is Country X. You became a citizen of Australia; therefore, you domicile of choice is Australia.

Permanent place of abode

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.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1852) 117 E.R. 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

In your case, there are various factors that indicate that you have established a permanent place of abode outside of Australia. Specifically:

• you have been living and working in Country X since November 200W;

• you purchased a residential property in Country X in 20BB; you have been living in this property since then;

• your family lives with you in Country X (apart from 31 August 20YY to 1 November Z when your spouse and children were in Australia).

Based on the information provided, the Commissioner is satisfied that your permanent place of abode is outside of Australia.

Therefore, you were not a resident of Australia for taxation purposes under this test in the financial year ended 30 June Z.

The 183 day test

Under the 183 day test, a person is a resident of Australia for taxation purposes 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 made 4 trips in the Z financial year. The purposes for these visiting were to visit your family. You did not spend more than 80 days in Australia on these trips.

Therefore, you were not a resident of Australia for taxation purposes under this test for the financial year ended 30 June Z.

The superannuation test

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

You were not a resident of Australia for taxation purposes under this test as neither you nor your spouse are employed by the Australian Commonwealth government.

Summary

Based on the facts you have provided, you did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 between the period 1 July 20YY to 30 June Z. Accordingly, you were not a resident of Australia for taxation purposes during that time.

Section 6-5 of the 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. 

In your case, any income you earn from Australian sources will be assessable in Australia. You will be required to pay tax at non-resident rates.

The income you earn in Country X will not be assessable in Australia.