Edited version of your written advice

Authorisation Number: 1012981340927

Date of advice: 10 March 2016

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

The scheme commenced on

1 July 2015

Relevant facts and circumstances

General

You were born in a foreign country and are a foreign country citizen.

You have no permanent residency status in Australia. You have a short term visa. You have never been a resident of Australia, having been in Australia only on brief visits.

You and your spouse jointly own and operate two businesses in a foreign country.

You reside together with your spouse and children in a foreign country.

You have lived at the same address in a foreign country for several years.

You were granted permanent residency status in a foreign country.

You travel on your foreign country passport and obtain the necessary visas to enable you to go to the countries you holiday in. You had short term visas for all of these visits.

None of your visas were supplied by your employer.

You have always lived in a foreign country having. Whilst you intend to reside in Australia at some point in the distant future, this is not possible until you have sold your foreign country businesses.

You intend spending some time each year (together with your spouse and children) with your spouse's parents and grandparents and are proposing to stay in Australia for several months within any twelve month period. During your visits to Australia:

• your businesses in a foreign country will be run by full-time management staff;

• your mail will not be redirected to Australia; and,

• your children will be home-schooled by a teacher who travels with your family.

You will spend time each year in a foreign country visiting your family.

Your intention is to re-locate permanently to Australia in several years. As a preparatory step to this, you will apply for a permanent partner's visa.

You have an international health policy; you do not have any insurance in Australia.

When completing the incoming and outgoing passenger cards, you would have said you were a foreign country resident. The address you gave may have been your spouse's parents' address as you think the form asks for a local address.

You have not lodged any Australian income tax returns while overseas. You are a tax resident in a foreign country and have lodged tax returns there for your companies.

Neither you nor your spouse is a member of the CSS or the PSS.

You are more than 16 years of age.

Accommodation

You have never lived in Australia by yourself. You have only stayed with relatives or rented houses.

You have never owned a home in Australia. You intend to purchase an investment property in Australia the near future. When in Australia, you will stay in this dwelling. It will be made available for renting when you not in Australia.

Assets

Your only asset in Australia is a bank account held jointly with your spouse. This account will be used for transferring money from overseas in order to purchase the property mentioned above as well as collecting rents from this property and to paying for travelling and living expenses while in Australia. You have obtained a tax file number when you opened the bank account so the bank can deduct non-resident withholding.

You have no household or personal effects in Australia.

You do not receive income from Australian sources.

You have lived overseas your entire life and have acquired assets overseas:

• two companies in a foreign country

• land and dwellings in a foreign country and a foreign country

• vehicles in a foreign country and a foreign country

• bank accounts in a foreign country and a foreign country

• household effects in a foreign country and a foreign country.

Your current sources of income are from your business and investments in a foreign country.

Family and social connections

You have children.

You have no professional, social or sporting connections with Australia.

We have a large network of friends in a foreign country. However, working in your industry away for long periods does not allow you to be a member of social, sporting or religious organisations.

You have overseas qualifications:

• driver's licence for cars

• a heavy duty vehicle licence and

• a motorbike licence.

Employment

There is no position of employment held or being held for you in Australia.

You will not engage in any employment in Australia during your visits.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(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

• the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(i) Physical presence in Australia

(ii) Nationality

(iii) History of residence and movements

(iv) Habits and "mode of life"

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you are not a resident of Australia, specifically:

• You were born in a foreign country and are a citizen of that country.

• You have no permanent residency status in Australia. You have a short term visa.

• You visit Australia on brief visits for holidays, for your wedding and to meet your Australia spouse's family.

• You reside together with your spouse and children in a foreign country.

• You and your spouse jointly own and operate businesses in a foreign country.

• You have been granted permanent residency status in a foreign country.

• Your intention is to re-locate permanently to Australia in several years. As a preparatory step to this, you will apply for a permanent visa.

• You have never lived in Australia by yourself. You have only stayed with relatives or rented holiday houses.

• You have never owned a home in Australia although you intend purchasing an investment property in Australia the near future, which you will live in when in Australia.

• Your only asset in Australia is a bank account.

• You have no household or personal effects in Australia.

• You do not receive income from Australian sources.

• You have lived overseas your entire life and have acquired assets overseas in foreign countries.

• Your current sources of income are from your business and investments in a foreign country.

• You have no professional, social or sporting connections with Australia.

• We have a large network of friends in a foreign country.

Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the period of the ruling.

The domicile and permanent place of abode 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

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.

Your domicile of origin is a foreign country; the country of your birth. Your domicile of choice is a foreign country as you have obtained permanent residency status in a foreign country, where you have live and worked for many years.

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.

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.

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.

You have established a permanent place of abode in a foreign country as your presence is permanent in nature.

The Commissioner is satisfied you have a permanent place of abode outside of Australia.

Therefore, you will not be a resident of Australia under the 'domicile and permanent place of abode' test of residency for the period of the ruling.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

You intend spending several months in Australia with your spouse and children staying with your spouse's parents and grandparents.

You will not been present in Australia for a total period of more than half of a year of income.

Therefore you will not a resident of Australia under the 183-day test for the period of the ruling.

The superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have stated that neither you nor your spouse is eligible to contribute to the PSS or the CSS. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.