Edited version of your written advice

Authorisation Number: 1051347429517

Date of advice: 7 March 2018

Ruling

Subject: Residency

Question 1

Are you a resident for tax purposes for period 1?

Answer 1

No

Question 2

Are you a resident for tax purposes for period 2?

Answer 2

Yes

Question 3

Are you a resident for tax purpose for period 3?

Answer 3

No

Question 4

Are you a resident for tax purposes for period 4?

Answer 4

Yes

Question 5

Did you become an Australian resident for tax purposes on your return to Australia permanently?

Answer 5

Yes

This ruling applies for the following period

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

You are an Australian citizen.

You left Australia to live and work overseas for five years with no return date planned.

You disposed of all personal possessions in Australia prior to leaving.

You retained your Australian bank accounts.

You and your partner were offered a one year contract to teach in Country B.

You entered Country B on a tourist visa.

You rented a house in Country B for a number of years.

You were required to cross an international border or report to an immigration office every 90 days.

On completion of your contract you accepted a new contract with the same employer in a neighbouring city.

You rented a room in a serviced apartment, while your partner remained in the original house.

After 3 months you then accepted another position to be closer to your partner.

You resigned from that position due to a pay dispute and returned to your partner.

You and your partner were told of work opportunities in Country C and were successful in your applications to teach at the school.

Due to visa restrictions you returned to Australia for period 2 while your visa’s were finalised as you were required to depart from Australia to Country C. During this period you became a resident for tax purposes in Australia as you received a government allowance available to residents only.

You relocated to Country C.

You were supplied with an apartment and utilities as part of your remuneration package.

Shortly due to a pay dispute you and your partner resigned from these positions and returned to Country B.

You were both offered teaching positions in Country D for a 2 year period which you accepted. You lived in accommodation provided by your partner’s employer.

You fell ill shortly after and returned to your leased accommodation in Country B for medical treatment where you spent 2 weeks to a month at a time, traveling between Country B and Country D. Your partner remained in Country D.

You returned to Australia due to a family emergency.

You stayed with family, not knowing how long you would need to remain in Australia and received a government allowance from midd 20XX.

During your visit you suffered your own medical emergency in late and was admitted to hospital.

Your partner returned to Australia to be with you.

You both returned to Country D in late 20XX, your government allowance ceased.

In early 20XX a family member passed away so you returned to Australia permanently, you received a government allowance from this date.

You returned to Country D to pack up your home and returned to Australia

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Residency

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 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 ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd 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 Commissioner may make reference to the following factors in determining whether a taxpayer is 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.

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

In your case, there are various factors that indicate that you were not residing in Australia during the years in question, specifically:

● you did not maintain a place of abode in Australia.

● you lived in leased accommodation in Country B (which you maintained from the date you arrived until your partner returned to Australia), Country C and Country D.

Based on the above, you were not residing in Australia during period 1 and period 3. Therefore, you were not a resident of Australia under the resides test of residency for these periods of the ruling.

You did reside in Australia for period 2 and received a government allowance. Therefore, under ordinary concepts, you were a resident of Australia under the resides test of residency for this period of the ruling, and continue to be a resident under the resides test from your permanent return to Australia.

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.

In your case, your domicile of origin is Australia and there is no evidence to suggest that you changed your domicile while you were based in another country.

Therefore, your domicile was still Australia during the relevant period.

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.

In your case, there are various factors that indicate that you had a permanent place of abode outside Australia during the relevant years:

● you lived and worked overseas for approximately three years;

● you lived in leased accommodation which was for your own exclusive use; and

● you did not maintain a place of abode in Australia.

Based on the above, the Commissioner is satisfied you had a permanent place of abode outside Australia during the relevant periods. Therefore, you were not a resident of Australia under the domicile and permanent place of abode test of residency for the periods 1 and 3. You returned to Australia for period 2 and received a government allowance therefore making you a resident for tax purposes.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are 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.

You were not a resident of Australia under this test as you were not present in Australia for more than 183 days during periods 1, 2 and 3.

The superannuation test

An individual is 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 were not a resident under this test for the relevant years.

Your residency status

You were not an Australian resident for taxation purposes for periods 1 and 3. You were a resident for period 2. You became a permanent resident for tax purposes from mid 20XX.

ATO view documents

Taxation Ruling IT 2650 – Income tax: residency – permanent place of abode outside Australia