Edited version of private advice

Authorisation Number: 1051614097245

Date of advice: 2 March 2020

Ruling

Subject: Residency

Question

Were you a resident of Australia for taxation purposes?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 201B

Year ended 30 June 201C

Year ended 30 June 201D

Year ended 30 June 201E

Year ended 30 June 201F

The scheme commenced on:

1 July 201A

Relevant facts and circumstances

You were born in Australia and you are a citizen of Australia.

You went to Country Y to live with your spouse in the 201B income year.

Your spouse was working in Country Y.

The contract was for 3 years and was extended for a further 12 months.

You entered Country Y on a dependant's visa supplied by your spouse's employer.

You took 2 of your children with you.

You and your spouse rented accommodation in Country Y.

You took personal items to Country Y with you.

Your spouse received an allowance to assist with accommodation costs.

Your spouse purchased two cars for you both to use in Country Y.

Two of your children remained in Australia in your family home as they were at school and University.

You sold your original home in Australia in 201C and purchased another one.

This second home was sold in 201E.

You did not work while in Country Y.

You did not lodge tax returns in Australia for the period you were in Country Y.

You were not in Australia for more than 183 days in any financial year while living in Country Y.

You made several short trips made back to Australia between early 201B and 201E for short durations only.

You returned to Australia in the 201F income year to live.

You and your spouse are not eligible to contribute to the relevant Commonwealth Superannuation funds.

Relevant legislative provisions

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

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 and your family went to Country Y in the 201B income year.

Your spouse was working in Country Y.

The initial contract was for 3 years and was extended for a further 12 months.

You and your spouse rented accommodation in Country Y.

You returned to Australia for short visits to visit family and friends during the period you were in Country Y.

Your day to day life was in Country Y for 4 years.

Based on the information you supplied to the commissioner, your behaviour in Country Y during the 4 years you lived there reflects a degree of continuity, routine and habit that is consistent with residing in Country Y. You were not residing in Australia according to ordinary concepts.

Accordingly, you were not a resident under this test.

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 Australia. You did not take any steps to change your domicile. Therefore your domicile will remain Australia.

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.

Your intention initially was to be in Country Y for 3 years and then your spouse's contract was extended for a further 12 months.

This period was not temporary in nature and was not a short period of time.

There was sufficient time for you to establish a home outside Australia and given the length of stay was 4 years the Commissioner is satisfied in applying all of the factors that you had established a permanent place of abode outside Australia.

The Commissioner is also satisfied that you have set up a permanent place of abode outside Australia for the following reasons:

·        You took personal items to Country Y.

·        2 of your 4 children went to Country Y with you and your spouse.

You were not a resident under this test.

The 183-day test

Where 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 were not in Australia for more than 183 days in any financial year for the period you were living in Country Y.

You were 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 PSS or the 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 are not eligible to contribute to the relevant Commonwealth super fund.

Your residency status

You were not a resident of Australia for taxation purposes for the period you were in Country Y.