Private ruling: Residency
Date of advice: 7 August 2015
Published: August 2015
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 18 February 2014

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | No.

Relevant facts and circumstances: You were born in a foreign country. You are allowed to be in Australia because you are citizen. You consider Australia to be your home country. You departed Australia with your spouse. You were an Australian resident for tax purposes immediately before leaving Australia. You are not an Australian resident who is emigrating to live permanently in another country. You do not plan to return to Australia more than four times every year. You were terminated by your Australian employer due to the significant downturn in the economy. When your spouse was also terminated from their employment, you decided to find work in your home country, a foreign country, as both of you faced difficulties attempting to secure relevant positions in Australia. You have obtained employment in a foreign country as a permanent full time employee. You have no intention of returning to Australia. You will be outside Australia for more than five years. You will live with your spouse in a foreign country. You will spend the majority of your time based in one place while overseas. You and your spouse are currently leasing an apartment in a foreign country but are seeking to purchase a property in the near future. You and your spouse are members of an organisation in a foreign country. A child of yours is studying in Australian and is independent. Another child is also independent and is working and residing in Australia. Your personal belongings of the family are kept in a foreign country. You have family in a foreign country. You meet regularly. You and your spouse have leased out your property in Australia. You will appoint your tax agent to handle your tax affairs and correspondence with the ATO. Your family private health insurance has been suspended and you do not have any other clubs memberships or ongoing subscriptions. You have informed relevant authorities of your departure from Australia, namely: • Australian Electoral Office • Department of Foreign Affairs and Trade • Medicare and • Centrelink You have informed your banks of your departure from Australia and they are deducting 10% withholding tax. You are you over 16 years of age. Neither you nor your spouse is eligible to contribute to the CSS or the PSS.

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: Summary: 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 first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 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. In your case, there are several factors outlined above which indicate that you have ceased to be a resident of Australia, specifically: • you have moved to a foreign country to live and work • your spouse will live with you there • you will be outside Australia for more than five years • you have no plans to return to Australia • you have rented out your dwelling in Australia • you intend buying a dwelling in a foreign country • your personal belongings are kept in a foreign country • You have informed the following of your departure from Australia: • Australian Electoral Office • Department of Foreign Affairs and Trade • Medicare and • Centrelink You have informed your Banks of your departure from Australia and they are withholding 10% non-resident withholding tax. Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the relevant period. | 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, you were born in a foreign country and moved to Australia and became a citizen of Australia. Therefore, your domicile of origin was a foreign country and you changed your domicile to Australia. Your domicile will still be Australia while you are living and working in a foreign country as you have not indicated that you will be taking any legal steps to change your domicile to that country. 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. You have established a permanent place of abode in a foreign country in rented accommodation with intent of purchasing a dwelling there. Your dwelling in Australia has been rented out. The Commissioner is satisfied you have a permanent place of abode outside of Australia. Therefore, you will not be a resident of Australia under the 'domicile and permanent place of abode' test of residency. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You have not been present in Australia for a total period of more than half of the year of income since you departure from Australia. Therefore you are not a resident of Australia under the 183-day test. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (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 have stated that neither you nor your spouse is a member of the PSS or CSS and you are over 16 years old. Therefore, you are not a resident of Australia under the superannuation test. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes since your departure from Australia.