Edited version of your written advice

Authorisation Number: 1013046614876

Date of advice: 5 July 2016

Ruling

Subject: Residency

Question 1

Were you a foreign resident of Australia from August 20XX?

Answer

No

This ruling applies for the following periods:

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

Year ended 30 June 2016

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian Citizen.

You were born in Country B and are a Country B Citizen.

You left Australia in 20XX indefinitely to live in Country A.

You were granted a visa under the Country A program.

You intended to sell your house in Australia and the house has been on the market from 20XX but has not sold in that time.

Your spouse remained in Australia and lives in your house in Australia during the time you were in Country A.

Your two adult children remained in Australia.

You returned to Australia every year for between two and five months to assist your spouse in maintaining and marketing the house for sale. You lived in your house in Australia when you returned.

You returned to Australia in 20YY for surgery.

Due to health reasons you intend to return to Australia permanently to live in your house in Australia.

You have been renting units in serviced apartments in City Z for rolling monthly or 3 monthly terms.

You have not set up a permanent home in City Z.

Your only assets in Country A are your personal affects.

You retired from working in 20AA and work is prohibited under your visa.

You hold investments in Country C.

You have a Country B bank account where your pension is paid from.

You have two Country A bank accounts.

You have an Australian bank account.

You own a car in Australia.

Your Australian income is a pension from your superannuation fund and interest from your Australian bank account.

You cancelled your active Australian club memberships.

You are a member of two clubs in City Z.

You are enrolled to vote in Australia.

You are not a Commonwealth Government employee.

You advised Medicare you were leaving Australia indefinitely.

Relevant legislative provisions

Income Tax Assessment Act 1997 Sections 6-5, 995-1, and

Income Tax Assessment Act 1936 Subsection 6(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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

• resides test

• domicile and permanent place of abode test

• 183 day test and

• Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

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.

You are an Australian Citizen.

You left Australia to live in Country A indefinitely in 20XX on a visa under the Country A program.

Your spouse remained in Australia in your family home with the intention of joining you in Country A when you had sold the house. Your two adult children also remained in Australia.

You lived in rented units in serviced apartments in City Z for rolling monthly or 3 monthly terms. You did not set up a permanent home in Country A.

Your only assets in Country A were your personal effects.

You returned to Australia every year for between two and five months to assist your spouse in maintaining and marketing the house for sale. You lived in your house in Australia when you returned.

You returned to Australia in 20YY for surgery.

In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.

Based on the facts you were residing in Australia according to ordinary concepts including from August 20XX as you maintained your Australian abode and family ties.

You are a resident under this test.

Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument.

The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Country B. However due to your ties to Australia, including citizenship, your domicile of choice is Australia.

You did not change your domicile of choice to Country A as you were not a permanent resident or citizen of Country A.

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 a person intends to live for the rest of his or her life.  An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

The Commissioner is not satisfied that you set up a permanent place of abode outside Australia for the following reasons:

• You lived in rented units in serviced apartments in City Z for rolling monthly or 3 monthly terms. You did not set up a permanent home in Country A.

• Your only assets in Country A were your personal effects.

You were a resident of Australia under this test.

The 183 day test

When a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You do not satisfy this test as you were not present in Australia for 183 days during any of the income years covered by this ruling.

The Superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

You are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not treated as a resident under this test.

Your residency status

You are a resident of Australia for tax purposes, including from August 20XX until you return permanently to Australia.