Private ruling: Residency
Date of advice: 1 September 2016
Published: November 2016
Ruling period: For the year ended 30 June 20XX | For the year ended 30 June 20XX
Date scheme commenced: The scheme has commenced

Ruling: Q1: Were you a foreign resident for tax purposes for the period that you lived and worked in Country A from dd/mm/yyyy to dd/mm/yyyy? | A1: You were a foreign resident for tax purposes for the period that you lived and worked in Country A from dd/mm/yyyy to dd/mm/yyyy

Relevant facts and circumstances: You have dual citizenship of Australia and Country A. You moved to Country A, with your partner and child, with the intention of working and living there indefinitely (for a period in excess of two years). You had no plans to return to Australia. You only bought one way tickets to Country A. You own a property in Australia. You leased the property to unrelated third party. You gave your household effects and cars to family members. You suspended all your memberships in Australia. You have shares in Australian companies. However you did not advise the companies that you were leaving Australia. You did not change your details on the Australian electoral roll. You did not advise your Australian banks or Medicare that you were leaving Australia. Country A was the only country you lived and worked in from leaving Australia on dd/mm/yyyy to dd/mm/yyyy. Whilst in Country A, you opened Country A bank accounts, joined the Country A Medical Association and a sporting club. You enrolled your child in school in Country A. You are not a Commonwealth Government Australia employee for Superannuation purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5.

Reasons for decision: Summary: The definition of resident provides four tests for determining whether an individual is a resident for taxation purposes. These tests are: • residence according to ordinary concepts; • the domicile and permanent place of abode test • the 183 day test; and • the Commonwealth superannuation fund test. Taxation Ruling TR 98/17 provides further guidance on the four tests. | Detailed Reasoning - Residency: The primary test for determining your residency is whether you reside in Australia according to the ordinary meaning of the word. It is clear that from the meaning of the word to reside in a place you need to be present in that place. You were not present in Australia from dd/mm/yyyy to dd/mm/yyyy. | Detailed Reasoning - The Domicile test: Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. Where a taxpayer leaves Australia for an unspecified or a substantial period and establishes a home in another country, that home will represent a permanent place of abode of the taxpayer outside Australia. As a broad rule of thumb, the ATO would generally regard a period of two years or more as a substantial period for the purposes of determining the permanency of the taxpayer's stay in the other country. Based on the facts provided, it is considered that you established a permanent place of abode during the time you were in Country A. Therefore, you are considered to be a foreign resident for tax purposes under the domicile test. Further information can be found in Taxation Ruling IT 2650. | Detailed Reasoning - 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 living in Country A the whole period of time you were away from Australia. Therefore, you are considered to be a foreign resident for tax purposes under the 183 day test. | Detailed Reasoning - The Commonwealth Superannuation test: You are considered to be a foreign resident under this test as you are not an eligible employee of any Australian Commonwealth Department. Based on the information you provided it is considered that you established a permanent place of abode outside Australia, and hence are considered to be a foreign resident for taxation purposes from the date of your departure from Australia. As a foreign resident of Australia, you are liable to pay tax on your Australian sourced income only, such as your rental income. From the date you became a foreign resident, any franked dividends you were paid or credited are exempt from Australian income and withholding taxes. You cannot use the imputation credit attached to those dividends to reduce your taxation liability or get a refund of the imputation credits. Any unfranked dividends are subject to withholding tax. From the date you become a foreign resident, your foreign-sourced income will be exempted from tax in Australia. Therefore, your foreign salary and wage income will not be assessable in Australia.