What is the 183 day rule?

This is the second statutory test.

Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that:

• your usual place of abode is outside Australia
• you have no intention to take up residence here.

In this test, we must be satisfied that your usual place of abode is outside Australia, whereas the first statutory test (domicile) requires us to be satisfied that your permanent place of abode is outside Australia.

What is a ‘usual place of abode’?

The phrase ‘usual place of abode’ should not be given the same or similar meaning as the phrase ‘permanent place of abode’. The terms ‘usual’ and ‘abode’ should be given their ordinary and natural meanings.

Determining your usual place of abode

Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used by you when physically present in a country.
Your place of abode need not be fixed but must exhibit the attributes of a place of residence or a place to live, as contrasted with an overnight, weekly or monthly accommodation of a traveler.

Applying the 183 day test

Your presence in Australia need not be continuous for the purposes of the 183 day test. All the days you are physically present in Australia during the income year will be counted. It is important to note that the 183 day test applies in relation to the year of income, not the calendar year.

Example of a foreign resident

Lars lives in Munich and is granted a 12 month working holiday maker visa. He plans to return to Munich, and resume his career as a carpenter, after his 12 month working holiday in Australia. He takes 12 months leave from his work. He owns a home in Munich which he does not rent out. Lars arrives in August 2007 and has five different jobs whilst he travels around Australia, visiting every capital city during his 12 month stay. He stays in no place for longer than two months. Lars only works for seven of the 12 months he is Australia as he is primarily here to see as much as he can, picking up carpentry work to supplement his funds as he travels. Lars is not an Australian resident under ordinary concepts and although he is in Australia for more than six months in the year ended 30 June 2008, Lars will not satisfy the 183 day test, as his usual place of abode is outside Australia.

Ref: ATO

The domicile test is the first statutory test. You are an Australian resident if your domicile is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

If in Australia, you are considered an Australian resident for income tax purposes.

What is a domicile?

Your domicile is the place that is:
• considered by law to be your permanent home
• usually something more than a residence.
You may have no fixed place of abode but under the law you will always have a domicile. You can only have one domicile at the one time, whereas you may be resident in two or more places.

There are three basic types of domicile, as established by common law and statutes:
Domicile by origin, which is attributed to everyone at birth. For example, a nuptial child adopts the domicile of its father, an ex-nuptial child that of its mother.

Domicile by choice, which will be inferred by law, if there is both a change of residence and an intention of making the change permanently or at least indefinitely. Any person without a legal disability can have a domicile of choice.

Domicile by operation of law, which is imposed by law. For example
an infant’s domicile is that of its parents and changes when the parent’s domicile changes, a married woman can acquire her own domicile, independent of her husband,
the age of capacity to have an independent domicile is fixed at18 years, or when the person marries.

In practice, if you are a resident who has always lived in Australia you will retain a domicile here when you are absent overseas, unless you choose to permanently migrate to another country.

Permanent place of abode

The following meanings have been established through case law:
• Permanent does not have the meaning of everlasting or forever, but is used in the sense
of being contrasted to temporary or transitory.
• your place of abode is your residence, where you live with your family and sleep at night.

When does this test apply?

The domicile test of residency usually applies where an Australian resident goes to work in an overseas country for an extended period of time.

In this situation:
• you may fail the resides test as you will be away for a lengthy period
• the absence would raise considerable doubt as to whether you are residing in Australia during that period
• it is a reasonable assumption that you will be overseas for a lengthy period you will
normally set up some form of abode there
• unless there are other significant factors, such as family and financial ties remaining
in Australia, it is usually a foregone conclusion that you do not reside in Australia.

However, you would normally have a domicile in Australia (unless you choose to change it) and therefore the domicile test can be applied. In doing so, the most important consideration will therefore be determining if you have a permanent place of abode abroad.

Determining your permanent place of abode

There are no hard and fast rules that can be used to determine your permanent place of abode. Taxation Ruling IT 2650: Income tax: Residency – permanent place of abode outside Australia outlines some relevant factors that are used by the courts, tribunals and ATO in deciding such cases.

The relevant factors are:
• intended and actual length of stay overseas, including the continuity of that stay
• existence of an established home overseas
• existence of a residence in Australia (while overseas)
• family and financial ties.

You would not be considered to have adopted a permanent place of abode outside Australia and would therefore be considered an Australian resident under the domicile test if you:
• have no fixed or habitual place of abode overseas but move from one country to another, or
• move constantly within the one country.