Edited version of your written advice

Authorisation Number: 1012826322750

Date of advice: 23 June 2015

Ruling

Subject: Residency

Question 1

Is the taxpayer considered to be a 'resident of Australia' for the purposes of the definition in subsection 6(1) of the Income Tax Assessment Act 1936 with respect to the years ended 30 June 20WW, 30 June 20XX, 30 June 20YY and 30 June 2015?

Answer

No.

Question 2

If the answer to Question 1 is yes, is the taxpayer considered to be a resident of Australia for the purposes of the international tax agreement between Australia and Country A with respect to the years ended 30 June 20WW, 30 June 20XX, 30 June 20YY and 30 June 2015?

Answer

As the taxpayer is not a 'resident of Australia' for the purposes of the definition in subsection 6(1) of the Income Tax Assessment Act 1936 with respect to the years ended 30 June 20WW, 30 June 20XX, 30 June 20YY and 30 June 20ZZ, an answer to this question is not required.

This ruling applies for the following periods:

The year ended 30 June 20WW ('the 20WW income year')

The year ended 30 June 20XX ('the 20XX income year')

The year ended 30 June 20YY ('the 20YY income year')

The year ended 30 June 20ZZ ('the 20ZZ income year')

Relevant facts and circumstances

The taxpayer was born in Country A and maintained their citizenship in Country A.

The taxpayer was educated in Country A, and began working for their now-spouse's business.

They were granted an Australian visa prior to the 20WW income year, which allowed them continue visiting Australia on the same visa for five years.

The taxpayer was never an Australian permanent resident or an Australian citizen.

Family ties

The taxpayer lived with their spouse and children in Country A during the 20WW to 20ZZ income years. Members of the taxpayer's family and extended family also lived in Country A.

Other than their spouse's relatives, the taxpayer had no direct family in Australia,

Visits to Australia

For several years, the taxpayer visited Australia once a year, over the December to January period for a holiday, accompanied by their spouse and children.

In the 20WW to 20ZZ income years, the taxpayer was physically present in Australia once a year, for approximately four to five weeks.

The taxpayer stated that the reason for the visits to Australia in the 20WW to 20ZZ income years was for the purpose of a holiday and to visit their spouse's relatives in Australia.

Connections to Australia

The taxpayer's spouse owned a property in Australia. The taxpayer and their family lived there when they visited Australia. They kept basic necessities at this property, for the family holidays and visits. This property remained vacant when the taxpayer and their family were absent and was not rented out.

The taxpayer had no investments in property or controlled entities in Australia.

During the 20WW to 20ZZ income years:

• The taxpayer and their family lived in the spouse's property when they visited Australia.

• The taxpayer had no bank accounts in Australia.

• The taxpayer was covered for emergency services while travelling in Australia.

• The taxpayer had no regular general practitioner in Australia.

In the 20ZZ income year, the taxpayer formed the intention to move to Australia with their family

Connections to Country A

The taxpayer had a number of real estate investments in Country A, held in their own name.

In the mid-2000s, the taxpayer's spouse acquired a property in Country A, purchased by the spouse's wholly-owned Country A company. The taxpayer stated this was because their spouse was unable to directly purchase property in Country A as they were not a national of Country A.

The taxpayer worked for their now-spouse's business since the mid-1990s. They continued working for the business since that time, and their role remained based in Country A.

Through their spouse's involvement, the taxpayer had involvement with a number of charities based in Country A.

During the 20WW to 20ZZ income years:

• The taxpayer and their family lived primarily in the spouse's property in Country A throughout the 20WW to 20ZZ income years.

• All of the taxpayer's personal and family belongings were located in Country A.

• The taxpayer's children attended school in Country A.

• The taxpayer held a few bank accounts in Country A.

• The taxpayer had public health insurance in Country A.

• The taxpayer attended a private medical centre in Country A.

• The taxpayer held a driver's licence in Country A.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Superannuation Act 1976

Reasons for decision

Question 1

Summary

The taxpayer was not a resident of Australia for income tax purposes for the 20WW, 20XX, 20YY and 20ZZ income years as they did not satisfy any of the tests for residency outlined in the definition in subsection 6(1) of the ITAA 1936.

Detailed reasoning

The terms 'resident' and 'resident of Australia', in regards 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 if a taxpayer is a resident of Australia for income tax purposes. These tests are:

1. The resides test (residence according to ordinary concepts)

2. The domicile test

3. The 183 day test

4. 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.

Residency status is a question of fact and is determined on a year by year basis.

For the years ended 30 June 20WW, 30 June 20XX, 30 June 20YY and 30 June 20ZZ, the taxpayer was not present in Australia for more than 183 days, and so the 183 day test in subparagraph (a)(ii) of the definition in subsection 6(1) of the ITAA 1936 does not need to be considered.

Neither the taxpayer nor their spouse were members of a relevant superannuation scheme and also were not eligible employees for the purposes of the Superannuation Act 1976, the superannuation test in subparagraph (a)(iii) of the definition in subsection 6(1) of the ITAA 1936 is not relevant.

1. Residence according to ordinary concepts test

The term 'resides' is not defined in the Australian income tax legislation and takes its ordinary meaning.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia provides 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 at paragraph 14 references the Macquarie Dictionary definition of 'reside', which is 'to dwell permanently or for a considerable time; have one's abode for a time'; and the Shorter Oxford English Dictionary definition, which 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 Subrahmanyam and Commissioner of Taxation [2002] AATA 1298; 2002 ATC 2303; (2002) 51 ATR 1173, in considering the word 'resides', Deputy President Forgie said at paragraph 48:

In its broadest sense, 'resides' carries with it the notion of having a home in a particular place. It carries with it the notion of some physical presence with the notion of an intention to treat the place as home, at least for the time although not necessarily forever. It may be expressed in terms of dwelling in a place.

Furthermore, in Joachim and Commissioner of Taxation [2002] AATA 610; 2002 ATC 2088; (2002) 50 ATR 1072 ('Joachim'), Senior Member Allen, at 2090; 1074, referred to the judgement by Williams J in Koitaki Para Rubber Estates Limited v Commissioner of Taxation, Commonwealth (1941) 64 CLR 241; [1941] HCA 13, which stated:

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 involuntarily, a person does not necessarily cease to be a 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.

The ordinary meaning of the word 'resides' was also considered in Iyengar and Commissioner of Taxation [2011] AATA 856; 2011 ATC 10-222; (2011) 85 ATR 924 ('Iyengar'), where Senior Member Walsh outlined a non-exhaustive list of factors that the Courts have referred to and taken in to account when considering whether a person ordinarily resides in Australia:

• Physical presence in Australia;

• Nationality;

• History of residence and movements;

• Habits and 'mode of life'

• Frequency, regularity and duration of visits to Australia;

• Purpose of visits to or absences from Australia;

• Family and business ties with Australia compare to the foreign country concerned; and

• Maintenance of a place of abode.

No single factor is necessarily decisive and all the facts and circumstances that describe an individual's behaviour are relevant when determining their residency status.

Senior Member Walsh in Iyengar also stated at paragraph 68:

Both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident in a country in a particular income year: see AFITR at [29-035].

In the taxpayer's circumstances

The factors outlined in Iyengar are considered below in relation to the factual circumstances of the taxpayer to determine whether the taxpayer ordinarily resided in Australia in the income years ended 30 June 20WW, 30 June 20XX, 30 June 20YY and 30 June 20ZZ ('the 20WW, 20XX, 20YY and 20ZZ income years'):

• Physical presence in Australia

In each of the 20WW to 20ZZ income years, the taxpayer was physically present in Australia for one visit each year, staying approximately four to five weeks each year.

• Nationality

The taxpayer was born in Country A and is a citizen of Country A, including throughout the 20WW to 20ZZ income years.

However, they were granted an Australian visa prior to the 20WW income year, which allowed them to continue visiting Australia on the same visa for five years.

The taxpayer was never an Australian permanent resident or an Australian citizen.

• History of residence and movements

The taxpayer has lived in Country A since their birth.

In the 20WW to 20ZZ income years, the taxpayer visited Australia once a year, staying approximately for four to five weeks.

• Habits and 'mode of life'

During the 20WW to 20ZZ income years, when the taxpayer was in Australia, they stayed with their spouse and children in a property owned by the spouse. However, for most of each year, they and their family stayed in Country A in a property owned by the spouse's company.

The taxpayer's children attended school in Country A throughout the 20WW to 20ZZ income years.

Through their spouse's involvement, the taxpayer had involvement with a number of charities based in Country A.

The taxpayer had public health insurance in Country A, while they were only covered for emergency services while travelling in Australia.

The taxpayer attended at a private medical centre in Country A for regular medical check-ups. However, they had no regular general practitioner in Australia.

The taxpayer held a driver's licence in Country A.

During the 20WW to 20ZZ income years, the taxpayer held a few bank accounts in Country A, but had no accounts in Australia.

• Frequency, regularity and duration of visits to Australia

For several years, the taxpayer visited Australia once a year. Each visit was usually over the December to January period, when they stayed for approximately between four to five weeks.

This routine was maintained in the 20WW to 20ZZ income years.

• Purpose of visits to or absences from Australia

The taxpayer stated that the reason for their and their family's continued and regular visits to Australia was for the purpose of a holiday and to visit their spouse's relatives in Australia.

• Family and business ties with Australia compared to Country A

A) Family ties

During the 20WW to 20ZZ income years, the taxpayer lived with their spouse and children in Country A. Members of their extended family also lived in Country A.

Other than their spouse's relatives, the taxpayer had no direct family in Australia,

B) Business ties

The taxpayer was educated in Country A, and began working for their now-spouse's business.

They continued working for the business since that time, and their role remained based in Country A.

The taxpayer had a number of real estate investments in Country A, held in their own name.

The taxpayer had no investments in property or controlled entities in Australia.

• Maintenance of a place of abode

In the mid-2000s, the property in Country A was purchased by the taxpayer's spouse's wholly-owned company. The taxpayer stated this was because the spouse was unable to directly purchase property in Country A as the spouse was not a national. The taxpayer and their family established a home at this property and they lived primarily in this home throughout the 20WW to 20ZZ income years. All of the taxpayer's personal and family belongings were located in Country A

The taxpayer's spouse also owned a property in Australia. The taxpayer and their family lived there when they visited Australia. They kept basic necessities at this property, for the family holidays and visits. This property remained vacant when the taxpayer and their family were absent and was not rented out.

Conclusion on ordinary residence

Based on the taxpayer's circumstances in the 20WW to 20ZZ income years, we consider that they did not maintain a continuity of association with Australia. They lived in Country A since their birth, were educated there, and spent their working career there. The taxpayer also met their spouse in Country A and they started a family.

While the taxpayer had their spouse's property available to them in Australia and a visa to continually enter Australia, the taxpayer maintained an attitude that Country A, and not Australia, was their home. This is evidenced by the presence of the taxpayer's immediate and extended family in Country A and the location of their personal and family belongings in Country A. The taxpayer maintained investment properties in Country A, but had no assets in Australia. They returned to Australia usually once a year for a family holiday, which was generally for a month. In each of the 20WW, 20XX, 20YY and 20ZZ income years, the taxpayer and their family were predominantly present in Country A, where the taxpayer was born, educated, and had worked all their life. The taxpayer established a pattern and habits of life in Country A. As they came to Australia merely for holiday purposes, these habits did not continue when the taxpayer visited.

Consequently, we consider that the taxpayer was not an Australian resident for income tax purposes under ordinary concepts for the 20WW, 20XX, 20YY and 20ZZ income years.

2. Domicile test

Taxation Ruling IT 2650 Income tax: Residency - permanent place of abode outside Australia provides guidelines to determine whether individuals who leave Australia to live overseas are residents of Australia for income tax purposes.

Paragraph 20 of IT 2650 states that, even though a person is not considered to reside in Australia under ordinary concepts, a taxpayer could still be a 'resident' within subparagraph (a)(i) of the extended definition of 'resident' in subsection 6(1) of the ITAA 1936.

Subparagraph (a)(i) of the definition of 'resident' in subsection 6(1) of the ITAA 1936 states that 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.

Domicile

Paragraph 8 of IT 2650 defines 'domicile' as a legal concept and states:

a person acquires at birth a domicile of origin, being the country of his or her father's permanent home… A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domiciles by operation of law.

Paragraph 10 of IT 2650 states:

In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1), it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency… On the other hand, if that person has in mind only a vague possibility of returning to Australia… such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country.

IT 2650 states, at paragraph 21, that a working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice. However, obtaining a migration visa may prove that an individual had the intention to make their home in that country and adopt a new domicile of choice.

The Tribunal in Iyengar stated at paragraph 97:

Whether a person has abandoned a domicile of choice with the "intention" of remaining permanently or indefinitely in the country of new domicile is a question of fact dependant on the particular circumstances of each case: Bell v Kennedy; Udny v Udny; Terrassin v Terrassin (1968) 3 NSWLR 600 and In the Estate of Fuld (No 3), quoted with approval in Buswell v IR Commrs (1974) 2 All ER 520). The acquisition of a "domicile of choice" is complete as soon as the intention is formed: Udny v Udny. The determination must be to settle in a particular country but not necessarily at a particular place: Bell v Kennedy. A move to another country without intending the move to be permanent is of no effect (Jopp v Wood (1865) 4 De GJ & S 616), while a mere intention to move permanently to another country without actually doing so is equally ineffective (Munro v Munro (1940) 7 C1 & F 842): see AFITR at [29-085]. [emphasis added.]

In the taxpayer's circumstances

The taxpayer was born in Country A and they were a citizen of Country A. As a result, their domicile of origin was Country A.

However, the taxpayer obtained an Australian visa prior to the 20WW income year, though they were never an Australian permanent resident or an Australian citizen.

We consider that the taxpayer maintained their domicile of origin in Country A throughout the 20WW to 20YY income years.

In the 20ZZ income year, the taxpayer formed the intention to move to Australia with their family. However, despite this intention to return to Australia, the taxpayer continued to reside in Country A for the 20ZZ income year.

Based on these facts, we are satisfied that the taxpayer maintained their domicile of origin in Country A throughout the 20WW to 20YY income years. The domicile of origin was also maintained in the 20ZZ income year, despite the taxpayer's intention to move to Australia, as they had not yet actually moved but remained in Country A, and so there was no change to their domicile of origin.

Accordingly, we consider that the taxpayer was not a resident of Australia for income tax purposes under the domicile test in subparagraph (a)(i) of the definition of 'resident' in subsection 6(1) of the ITAA 1936 for the 20WW, 20XX, 20YY and 20ZZ income years, as they maintained their domicile of origin in Country A and had not acquired a domicile of choice in Australia.

Conclusion

As we have concluded that the taxpayer was not a resident of Australia for income tax purposes under the ordinary concepts test or the domicile test, and as neither the 183 day test nor the superannuation test are relevant in these circumstances, the taxpayer has not satisfied any of the tests for residency outlined in subsection 6(1) of the ITAA 1936.

As a result, the taxpayer was not an Australian resident for income tax purposes for the 20WW, 20XX, 20YY and 20ZZ income years.

Question 2

As the taxpayer was not a 'resident of Australia' for the purposes of the definition in subsection 6(1) of the ITAA 1936 with respect to the 20WW to 20ZZ income years, an answer to the second question is not required.