Private ruling: Residency
Published: May 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: December 2013

Ruling: Q1: Are you a non resident of Australia for tax purposes from the date you left Australia? | A1: Yes

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You decided to relocate from Australia to Country X for study and work opportunities. You do not intend to acquire a domicile of choice in Country X. You hold a visa which allows you to work and live in Country X for five years. You left Australia to move to Country X in the year ended 30 June 2014. You have signed a two year lease of a furnished apartment in Country X. You are actively looking for employment. You are supporting yourself financially with your own savings. You do not have any assets in Australia. You have closed your Australian bank accounts and notified the Australian Electoral Commission to remove your name. You have shipped all of your personal documents and personal belongings to Country X. You have opened a bank account, enrolled with electoral services, purchased health insurance, become a member of a car club and signed a mobile phone agreement all in Country X. You do not intend to visit Australia in the next three years and you do not intend to return to live in Australia during the next five years.

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

Reasons for decision: Detailed Reasoning - Residency: 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: • 'resides' test (ordinary concepts test) • domicile and permanent place of abode test; • 183 day test; and • Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | Detailed Reasoning - The resides (ordinary concepts) test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. 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 considering the definition of 'reside', the court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, it was stated that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home. As indicated in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (Iyengar's case), there is usually a requirement that you be physically present in Australia for at least part of an income year to be considered a resident. In your case you left Australia to move permanently to Country X for at least five years. You do not intend to return to Australia for a visit for at least three years. Therefore, although you will not be physically present in Australia for the majority of each of the years you will be in Country X, this does not preclude you from being an Australian resident. | Detailed Reasoning - (ii) Nationality: Your country of origin is Australia and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence: You lived and worked in Australia prior to leaving to move to Country X. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. • You are living in Country X and have signed a two year lease on an apartment • You intend to live in Country X for five years • You hope to study in Country X and find work • You hold a bank account; medical insurance and phone service in Country X. • You are a member of a car club in Country X | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You do not intend to visit Australia in the next three years. You do not intend to return to Australia permanently during the next five years. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You have moved to Country X for study and work opportunities and your visa allows you to work and live in Country X for five years. | Detailed Reasoning - Family: No family members have accompanied you to Country X. You are single with no dependants. Your parent and siblings live in Australia. | Detailed Reasoning - Business or economic: You do not have any assets in Australia. You have not established any assets in Country X yet other than a bank account. | Detailed Reasoning - (viii) Maintenance of Place of abode: You are living in an apartment in Country X and have signed a two year lease. | Detailed Reasoning - Summary - resides test: You will not be residing in Australia due to the following factors: • you are living in Country X and have signed a two year lease on an apartment • it is your intention to study in Country X and find work • you will not be returning to Australia in the next three years • you do not intend to return to Australia permanently for at least five years • you do not have any assets in Australia • you have closed your Australian bank account and shipped all of your personal documents and personal belongings to Country X • you have had your name removed from the Australian electoral roll • you hold a bank account; medical insurance; and phone service in Country X. In consideration of the factors outlined above, you will not be residing in Australia according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the 183 day test, superannuation fund test and domicile and permanent place of abode tests. | Detailed Reasoning - Domicile and permanent place of abode: If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - 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 of becoming a citizen of the country concerned. Your domicile is Australia because your country of origin is Australia and you are still an Australian citizen. Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of 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. 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Consideration of these factors: • You intend to live in Country X for at least five years • The purpose of you moving to Country X is to study and work • You live in rental accommodation and have signed a two year lease • You do not have any assets or property in Australia • You took all of your personal documents and belongings with you to Country X • You closed your Australian bank account and removed your name from the Australian Electoral Commission The Commissioner is satisfied that you will have a permanent place of abode outside of Australia. | Detailed Reasoning - 183 day: 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. As you will not be in Australia for more than one-half of the relevant income years this test is not relevant to your circumstances. | Detailed Reasoning - Superannuation fund test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the 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 were a Commonwealth Government employee but you are no longer an employee as you resigned. Furthermore, you were a member of a super fund that was not PSS or CSS. Therefore this test does not apply to your circumstances. | Detailed Reasoning - Conclusion - your residency status: As you do not meet any of the above tests, you are not a resident of Australia. | Detailed Reasoning - Part year tax free threshold: Where a taxpayer either becomes a resident or ceases to be a resident of Australia during a year of income, the period of part-year residency for calculating the pro-rating of the tax-free threshold is determined under section 18 of the Income Tax Rates Act 1986 (Rates Act). When you complete your 2014 tax return your tax-free threshold will be pro-rated according to your departure date from Australia. You will need to ensure you complete the relevant section on the tax return form.