Private ruling: Residency - Leaving Australia
Date of advice: 15 June 2017
Published: October 2017
Ruling period: Year ended 30 June 201B | Year ended 30 June 201C | Year ended 30 June 201D | Year ended 30 June 201E
Date scheme commenced: 1 July 201A

Ruling: Q1: Are you a resident of Australia for taxation purposes for the period 201B to 201E? | A1: Yes | Q2: Is your foreign source income assessable in Australia for the period 201B to 201E? | A2: Yes | Q3: Are you a resident of Australia for taxation purposes for the period 201A to 201B? | A3: No | Q4: Is your foreign source income assessable in Australia for the period 201A to 201B? | A4: No

Relevant facts and circumstances: You were born in Country X. You are a citizen of Australia. You departed Australia to work in multiple overseas countries including Country X, Country Y and Country Z. You lived in employer provided accommodation when you were working overseas. Your family moved with you to Country X while you were employed there. Your children left for schooling in Australia during your employment in that country. Your spouse went back to Australia during the last year of your employment there. Your spouse and family remained in rented accommodation while you were working overseas. You returned to Australia in between your employment and for short periods of time on vacation to see your family during the years you were working overseas. You retained an Australian bank account, motor vehicle and superannuation account. You kept your Australian private health insurance while you were working overseas. You did not receive any income from Australian sources. You did not acquire any assets while overseas. You did not maintain any professional, social or sporting connections in Australia or in the overseas countries you were working in. You obtained Country X and Country Y drivers licenses while working in those countries.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(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, and ● the superannuation 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - Resides 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. The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year: ● Physical presence in Australia; ● Nationality; ● History of residence and movements; ● Habits and 'mode of life’ ● Frequency, regularity and duration of visits to Australia; ● Purpose of visits to or absences from Australia; ● Family and business ties with Australia compare to the foreign country concerned; and ● Maintenance of a 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. You were born in Country X and are now an Australian citizen. You have not become a citizen of another country. You have been overseas for substantial amounts of time during the relevant time period for employment. Before the relevant time period, you had also been working in various overseas locations. You have only returned to Australia during the periods between your employment and for short periods of time for vacation. Your family have normally resided in Australia except for the period in which you worked in Country X. In that time your family accompanied you. However your children returned to Australia to complete their education. Your spouse returned to Australia in 201B to be with your children. While you have no formal business ties in Australia, you do maintain an Australian bank account, Superannuation account and own a motor vehicle. In the case of Iyengar v FCT 2011 AATA 856, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. In your case you went to the various work locations for work purposes. This was because you were unable to find work in Australia. Your family accompanied you to Country X however they returned to Australia during your employment there. From during 201B onwards, the rest of your family remained in Australia. You never formed the intention to permanently move to these work locations. It is considered that from the time you left Country X in 201B, you would be considered to be a resident. However for the time your family were living with you in Country X you would be considered to be a non-resident. While it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode’ test as an alternative argument. | Detailed Reasoning - The domicile test: Under the domicile test, a person is a resident of Australia if their domicile is in Australia 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 common law rules. A person’s domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice. In your case, you were born in Country X and your domicile of origin is Country X. You have since become an Australian citizen and your domicile of choice is Australia. It is considered that you did not abandon your domicile in Australia and acquired a domicile of choice in the various counties you were employed in. You were not entitled to reside in those counties permanently. | Detailed Reasoning - Permanent place of abode: A person’s 'permanent place of abode’ is a question of fact to be determined in the light of all the circumstances of each case. ( Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 ( Applegate )) In Applegate , the court found that 'permanent’ does not mean everlasting or forever but it is to be contrasted with temporary or transitory. The courts have considered 'place of abode’ to refer to a person’s residence, where he lives with his family and sleeps at night. Taxation Ruling IT 2650 Income Tax: Residency – Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual’s permanent place of abode. These factors include: (a) the intended and actual length of the individual’s stay in the overseas country; (b) any intention either to return to Australia at some definite point in time or to travel to another country; (c) the intended and actual length of the individual’s stay in the overseas country; (d) any intention either to return to Australia at some definite point in time or to travel to another country; (e) the establishment of a home outside Australia; (f) the abandonment of any residence or place of abode the individual may have had in Australia; (g) the duration and continuity of the individual’s presence in the overseas country; and (h) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer’s children, family ties. Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors. You created no professional, social or sporting ties with these other countries. You never established a permanent home outside Australia but lived in employer provided accommodation at various hotels. While you had long stays in these countries, you developed no ties to that country and you did not have the intention of moving there permanently. You have no true sense of continuity being developed as you have changed employers and countries numerous times during the requested period. You however would have developed a permanent place of abode while your family were living with you in Country X. This means you will be determined to be a non-resident for the period 201A to 201B. You will be considered a resident from that time onwards. | Detailed Reasoning - Your residency status: You were a resident of Australia for part of the 201B onwards. You would be considered a non-resident of Australia for the period 201A to 201B. During the period you were an Australian resident for taxation purposes you are required to declare all your income both in Australia and outside Australia. Your foreign sourced income earned between 201B to 201E is assessable in Australia and is required to be declared in your Australian tax returns.