Private ruling: Residency
Date of advice: 5 June 2018
Published: August 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: July 2017

Ruling: Q1: Are you a non-resident of Australia for taxation purposes from when you left Australia? | A1: No | Q2: Are you a non-resident of Australia for taxation purposes from when your family joined you overseas? | A2: Yes

Relevant facts and circumstances: You were born in Country D. You left your employment in Australia. You departed Australia permanently and migrated to Country B. Your spouse and child departed Australia at a later date to join you. You all have a Country B residence Visa’s. You have secured permanent employment. Your child attends school in Country B. You opened a bank account in Country B. You have a lease agreement for permanent accommodation and purchased a vehicle in Country B. You removed yourself from the Australian electoral roll. You sold your vehicle and personal effects in Australia. You cancelled your membership with various social clubs in Australia. You have no intention of returning to Australia. You have two investment properties in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Detailed Reasoning - 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. 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 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. | Detailed Reasoning - 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'. In determining where an individual resides, it should be noted that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. Instead, the test is whether the person has retained a continuity of association with a place in Australia, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation 2002 ATC 2088 ). 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 year in question, specifically: ● you live in leased accommodation in Country B which is for your own exclusive use; ● Your family moved overseas to be with you at a later date; ● You have secured permanent employment; and ● you do not maintain a place of abode in Australia. Based on the above, you were residing in Australia from the date you departed until your spouse and son joined you to live overseas. Until then while you were not in Australia your connection to Australia was still strong as your family were still here and you were simply working overseas. Once your family joined you in living overseas, you and your family’s connection to Australia was broken and you ceased to be a resident under the resides test. | Detailed Reasoning - 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 the Country D, you became a citizen of Australia in 198X, there is no evidence to suggest that you changed your domicile to the Country B, therefore, your domicile is 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, once your family joined you overseas, during the relevant years: ● you live and work permanently in Country B; ● your spouse and child joined you at a later date; ● you have no intention of returning to Australia; ● you hold the majority of your assets in Country B; ● you live in leased accommodation which is for your own exclusive use; and ● you do 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 period. Therefore, you were not a resident of Australia under the domicile and permanent place of abode test of residency, from the date your spouse and child joined you in Country B. | Detailed Reasoning - 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 the relevant year. | Detailed Reasoning - 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 were not a resident under this test for the relevant year. | Detailed Reasoning - Your residency status: Based on the facts you have provided, we conclude that you are not a resident of Australia for taxation purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936 from the day your spouse and child joined you in Country B. When you departed Australia your spouse and child remained here, therefore not breaking your residency connection until the day they left to join you overseas. | Detailed Reasoning - Further information: If your status changes from resident to non-resident before the end of an income year you should answer 'yes' to the question 'Are you an Australian resident?' on your tax return for that year. This ensures you are taxed at resident rates for that part of the tax year you were resident in Australia. Your non-residency for part of the year will be taken into account by a reduction in your tax-free threshold for that year. You will be entitled to a pro-rata tax-free threshold for the number of months you were an Australian resident during the income year. To do this, you will need to complete question A2 on your tax return ‘Part-year tax-free threshold’. Non-residents of Australia do not have to pay the Medicare levy, so you can also claim the number of days that you were not an Australian resident during a tax year in your return as exempt days.