Private ruling: Residency
Date of advice: 2 December 2016
Published: May 2017
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Q1: Were you a resident of Australia for tax purposes during the period of time that you were living in Country A? | A1: No

Relevant facts and circumstances: You are an Australian citizen. You signed a fixed term assignment contract with your employer to work for your employer's Country A subsidiary for an X year period. You arrived in Country A on a work permit that was valid for an X year period. Your work permit covered your spouse and children. You intended to remain in Country A for the full X years but due to a change in your employment you were required to return to Australia early. You departed Australia during 2015 for Country A. You completed your immigration departure card as “permanently departing” Australia. Your spouse and children relocated to Country A after you in 2015 due to schooling and employment requirements. Your furniture from your main residence was shipped to Country A before your spouse and children departed Australia. Your spouse and Y children remained in your main residence using borrowed furniture until their departure. You secured a Y year lease on a residence in Country A. You and your family lived in the leased residence for the duration of the period you were in Country A. You sold one of your vehicles prior to leaving for Country A and you sold your other vehicle a few months after your family moved to Country A. You rented out your main residence in Australia from the date your family departed Australia. You were the trustee of a bare trust and your self-managed superannuation fund. You made arrangements for the trust and superannuation fund to change the trustees on your departure and appointed your parent as a trustee. You removed yourself as executor of your parents' will before you departed. You and your spouse were members of your local sporting club in Australia and you did not renew this membership while you were living in Country A. You suspended your private health insurance policy while in Country A. You cancelled your home and contents insurance and your car insurance prior to your family's departure. You advised a number of the banks you have accounts with of your non-resident status and provided an overseas address to both institutions. You did not inform the credit unions that you hold accounts with of your non-resident status and you did not provide them with an overseas address. You hold shares with Australian companies and you did not notify the share registries of an overseas address. You arranged for your mail to be redirected from your main residence in Australia to your parents' address. You made a number of trips to Australia during the period between your departure and your family's departure where you spent a total of 50 days in Australia. You stayed in your main residence with your family for a total of 37 days, twice for business and once to relocate your family to Country A. For the other 13 days you were travelling interstate for business and stayed in hotels. You made a number of trips to Australia after your family joined you in Country A where you spent a total of 20 days in Australia. You stayed in hotels or with family or friends in their residences during these trips. You own an investment property in the State of Z. You are not a member of a Commonwealth Superannuation scheme. You and your spouse remained on the Australian electoral roll for the duration of your time in Country A. You and your spouse opened bank accounts in Country A. Your salary was paid into your Country A bank account in Country A currency. Your salary in Country A was used to pay rent and daily living expenses in Country A. You occasionally transferred funds to pay off your mortgage in Australia. You obtained a credit card in Country A. You hired a domestic helper to assist with daily household chores for your family in your home in Country A. Your children attended school in Country A. You entered into 12 or 24 month contracts for internet and telephone connections, utilities, mobile phone and pay TV in Country A. You and your spouse joined the Country A Sporting Club. You returned to Australia in 2016 to start a new role with your employer which required you to be in Australia. You are renting accommodation in Australia until the lease on your main residence has ended.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) and | Income Tax Assessment Act 1997 section 6-5.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are foreign resident for taxation purposes, your assessable income includes only income 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 an Australian resident 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. | Detailed Reasoning - The resides 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 considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests. The ordinary meaning of the word "reside", according to the Shorter Oxford English Dictionary, 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 your case, you were living in Country A during 2015 and 2016. You were working on a long term contract and you lived in rental accommodation with your spouse and children in Country A. Therefore, you are not considered to have been residing in Australia according to ordinary concepts during this time and you were not an Australia resident for taxation purposes under this test from your date of departure to Country A until your permanent return to Australia. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: 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 have not changed your domicile of choice to Country A as you were not a permanent resident or citizen of Country A. | Detailed Reasoning - 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 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. In your case, although you are maintained an association with Australia through your property, bank accounts and extended family, your associations with Country A were more significant during the period you were living in Country A as: ● You obtained long term rental accommodation in Country A for you and your family to reside in; ● You obtained permanent employment in Country A; ● You opened a bank account in Country A; ● Your spouse and children moved to Country A to join you; ● You shipped your personal effects to Country A. Based on these facts, it is therefore considered that you established a permanent place of abode in Country A. Therefore, you are not considered to be an Australian resident under the domicile test from when you left Australia until you returned to Australia permanently. | Detailed Reasoning - The 183 day test: When 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. Your permanent place of abode was outside Australia from when you left Australia until you returned to Australia permanently and you are therefore not considered a resident of Australia under this test. | 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 are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident under this test. | Detailed Reasoning - Your resident status: As you are not deemed to be an Australian resident under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you ceased to be a resident from the date of your departure from Australia until you returned to live in Australia on.