Edited version of your written advice

Authorisation Number: 1013087683480

Date of advice: 9 September 2016

Ruling

Subject: Residency

Question

Are you an Australian resident for income tax purposes?

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

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commences on:

January 20YY

Relevant facts and circumstances

You were born in Country X.

You are a Country X's citizen.

You are a permanent resident of Australia.

You and your family moved back to Country X a number of years ago.

You can stay in Country X indefinitely on your Country X's passport.

You have a spouse and X dependent children, who are currently living with you in Country X.

Your children are Australian citizens.

They need Country X's visas to stay in Country X.

You intend to stay in Country X indefinitely.

You may return to Australia for your children's education in the future

You came back to Australia a couple of years ago with your children.

The purpose of your visit was looking for an investment property, and also you wanted to find out whether your children could adapt to the Australian life style.

You and your children lived in your friend's property during that time.

Your Medicare card has expired.

Your private health insurance has been suspended.

You haven't lodged Australian income tax returns since you left Australia.

You maintain an Australian bank account.

You purchased an investment property in Australia couple of years ago.

You are the sole owner of that investment property.

You have a mortgage against that investment property.

You keep paying the mortgage while you are in Country X.

The property has been rented out.

You and your spouse jointly own X investment properties in Australia, which were purchased while you are overseas.

You stated you were a resident with subclass visa 155 when you purchased the Australian investments.

You sold your household effects in Australia prior to your departure.

You took your personal affects to Country X.

You own X properties in Country X.

You use X properties as your family home.

You have Country X's bank accounts.

You acquired Country X's investments while overseas.

You do not lodge tax returns in Country X.

You do not have professional, social or sporting connections within Australia.

You maintain professional social or sporting connections in Country X.

You obtained a driver's licence and other various qualifications, including a University degree, in Country X.

You are self-employed in Country X.

Both 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 Section 6-5

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

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 will still be a resident of Australia for taxation 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 Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia 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.

In the recent case of Iyengar v FCT 2011 ATC 10-222, the AAT 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.

In your case, you were born in Country X. You are a Country X's citizen. You and your family moved back to Country X a number of years ago. You intend to stay in Country X indefinitely. Your spouse and children are currently living with you in Country X. Your Medicare card has expired. Your private health insurance has been suspended. You own X properties in Country X. You use X properties as your family home. You have Country X's bank accounts. You acquired Country X's investments while overseas. You do not have professional, social or sporting connections within Australia. You maintain professional social or sporting connections in Country X.

Based on the facts of your case, the Commissioner accepts that you have not been residing in Australia according to ordinary concepts and you are not a resident under this test.

The domicile test

Under this test, a person whose domicile is Australia will be a resident of Australia for taxation purposes; unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin.

In your case, you were born in Country X; therefore, your domicile of origin is Country X. Your domicile of choice is Australia as you are a permanent resident of Australia.

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 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.

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

n Your spouse and children are living with you in Country X.

n You own X properties in Country X.

n You use X properties as your family home.

n You intend to stay in Country X indefinitely.

n You may return to Australia for your children's education in the future

You are not a resident under this test.

The 183 day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You have not been in Australia for more than 183 days in any financial year since leaving Australia and you do not intend on being in Australia for more than 183 days in future financial years.

You are not a resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector 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 contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You will not be treated as a resident under this test.

Summary

Based on the facts you have provided, you do not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Accordingly, you are not a resident of Australia for income tax purposes.

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, all income you earn from Australian sources, such as your investment property income will be assessable in Australia. You will need to lodge income tax returns in Australia.

You will be taxed at non-resident rates on all income that is sourced in Australia.

Further information

It is noted that you asked for the private ruling to apply from January 20YY onwards. The Commissioner does not rule for indefinite or extended periods of time as there may be changes to the facts of the arrangement or the law relating to residency. Also, a public ruling may issue which affects the private ruling. Therefore, we have ruled for the 20YY to 20ZZ income years.