Private ruling: Residency
Date of advice: 17 October 2017
Published: March 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Australia for income tax purposes from the date you permanently departed Australia? | A1: No

Relevant facts and circumstances: You are an Australian citizen. You are a professional in your field. In early 2017 you were approached by a potential employer to take up a position in Country A. During 2017 you, your spouse and your children moved to Country A on a permanent basis. You were retained as a full time employee for a period of not less than three years under an Agreement. You joined the Country A Club. The work season commenced in Country A just after your arrival. You have several assets in Australia including X investment properties, a bank account and an Australian superannuation fund. You no longer use your Australian bank account on a regular basis and have only kept the account necessary to facilitate your property investments. You no longer make contributions to your Australian superannuation fund. Your primary place of residence in Australia is a property owned by your spouse. Since leaving Australia the property has been leased and you no longer maintain a residence in Australia. You sold your motor vehicle prior to moving to Country A. Since you have moved to Country A you have: ● Been employed full time for a period of not less than three years, ● Opened a bank account ● Leased a home for you and your family to reside in, and ● Purchased a car. You will return to Australia for the purpose of working in Australia on an ad hoc basis. You intend to spend up to eight weeks per year in Australia as that is the maximum amount of leave you are entitled to under your agreement. You are not a member of the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or the spouse or child under 16 of such a person.

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

Reasons for decision: Summary: You do not meet any of the residency tests and therefore you are not a resident of Australia from the day you departed Australia to live in Country A. | Detailed Reasoning - Detailed reasoning: 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 Australian sources. 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 . 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. | Detailed Reasoning - The resides test: The ordinary meaning of the word reside, according to the dictionary definition, is to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place. You have moved permanently to Country A, and while you spend some time in Australia for work you do not live in Australia according to the ordinary meaning of the word. Therefore you do not meet the resides test. | 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: "Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law ( Henderson v. Henderson [1965] 1 All E.R.179; Udny v. Udny [1869] L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.)) . In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1) of the ITAA 1936, it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency e.g., the end of his or her employment. On the other hand, if that person has in mind only a vague possibility of returning to Australia, such as making a fortune (a modern example might be winning a football pool) or some sentiment about dying in the land of his or her forebears, such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country - see In the Estate of Fuld (No. 3)(1968) p. 675 per Scarman J at pp. 684-685 and Buswell v. I.R.C (1974) 2 All E.R. 520 at p. 526. 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. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. Your domicile of origin is Australia. You have moved to Country A indefinitely with your spouse and children; however there is no evidence that it is your intention to remain there should your employment cease. Therefore, on this basis you would maintain your domicile of origin, being Australia. | 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. Although you are maintaining an association with Australia through your property and bank account, your associations with Country A are more significant as: ● You have leased a house in Country A for you and your family to reside in; ● You have obtained permanent employment in Country A; ● You have joined the Country A Club ● You have opened a bank account in Country A; and ● Your spouse and children have moved to Country A. Based on these facts, it is therefore considered that you have established a permanent place of abode in Country A. Therefore, you are not considered to be an Australian resident under the domicile test. | 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. You will not satisfy this test as you do not intend to spend more than eight weeks in Australia per 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 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.

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