Private ruling: Are you a non-resident of Australia for tax purposes
Date of advice: 12 May 2017
Published: September 2017
Ruling period: The year ending 30 June 2018 | The year ending 30 June 2019 | The year ending 30 June 2020 | The year ending 30 June 2021
Date scheme commenced: 1 July 2017

Ruling: Q1: Will you be a non-resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You have lived in Australia since late 1998. You are not an Australian citizen, but have been an Australian permanent resident since 1992. You are currently living with your mother. The house you live in is owned by your mother. You are unmarried and have no dependent children. Your mother is elderly, not in good health and is dependent on you. You own a rental property from which you derive rental income. You plan to move with your mother to permanently live in Country X. You have no intention of returning to live in Australia. Your belongings will be moved to Country X. You operate a business in Australia that requires you to be present in Australia for no more than 5 months per year. When in Australia you will be living in the mother's former home. You plan to buy a home in Country X in which you and your mother will live. Your effects will be moved to this location. You are not on the Australian electoral roll. You are not a contributing member of an Australian Commonwealth Government superannuation fund. Upon moving to Country X you will: 1. Be informing government departments that she will be leaving Australia permanently. 2. Have one Australia bank account for her business and a separate one for her investment property. 3. Will have no other ties with Australia other than owning property.

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

Reasons for decision: Summary: Based on your stated intentions, you will be a non-resident of Australia for tax purposes. | Detailed Reasoning - Detailed reasoning: 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 derived 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. This includes employment income, rental income, Australian pensions and annuities and capital gains on Australian assets. 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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: ● resides 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - The resides (ordinary concepts) test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary (2001, rev. 3rd 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'. 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. The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia , (IT 2650) emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. | Detailed Reasoning - Physical presence in Australia: Taxation Ruling 1998/17 Income tax: residency status of individuals entering Australia ( TR 98/17) considers physical presence or length of time by itself is not determinative of residency. An individual's behaviour is reflected by a degree of continuity, routine or habit that is consistent with residing in Australia is relevant. You intend to spend at most five months per year in Australia. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: TR 98/17 states that habitual travel between Australia and another country is relevant but not sufficient to determine an individual's residency status. You intend to return to Australia for the purpose of operating your business for no more than five months per year. | Detailed Reasoning - Family and business ties with Australia: TR 98/17 considers the presence of family, and employment in Australia to be relevant in determining an individual's residency status. You will have no dependents in Australia. You will, however, still operate a business based in Australia and also have extended family in Australia. Your dependent mother intends to move with you to Country X. | Detailed Reasoning - Maintenance of a place of abode: IT 2650 considers one's permanent place of abode to be determined in large part to be a domicile in which a person and their family live for the foreseeable future. Your only property in Australia would be a rental property in which you have never lived. While visiting Australia, you intend to stay at your mother's house in which you are currently living. You intend to buy and live in a house in Country X with your dependent mother. You will not be maintaining a “permanent place of abode” in Australia, as your only property in Australia is operated to accrue rental income; nor would your mother's house in Australia be considered to be your “permanent place of abode” due to the length and infrequency of your habitation there. | Detailed Reasoning - Social and living arrangements: TR 98/17 considers the way in which individuals organise their social lives while in Australia. Factors that are taken into consideration include; the joining of community groups, enrolling children in school, and committing to a residential lease. You will lack a commitment to a lease in Australia and you will not have children enrolled at a school in Australia. You intend to close all of your Australian bank accounts except for two that will be used respectively for the operation of your business and the maintenance of your rental property. You intend to move all of your effects to your prospective domicile in Country X. In addition, you intend to inform all relevant government departments of your intention to leave Australia permanently. Based on all the facts, your behaviour is consistent with that of someone who is a non-resident of Australia for tax purposes. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. 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. 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 for a substantial period of time such as 2 years would be sufficient evidence of an intention to acquire a new domicile of choice. You have demonstrated that your domicile will not be in Australia for the following reasons: ● You intend to permanently leave Australia. ● You intend to buy a house in Country X and live there with you dependent mother. ● You and your mother intend to move your personal effects out of Australia. ● The only other property that you own is a rental property, which you never lived in. You have demonstrated that you will have a new domicile by choice in Country X for the following reasons: ● You intend to live indefinitely in Country X. ● You intend to buy a house in Country X. ● Your dependent mother will live with you in this house. ● You intend to move your personal effects to this house in Country X. | 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. The Commissioner is satisfied that you do not meet the 183 days test. As discussed above, it is not your intention to remain in Australia for more than 183 days. If you were to remain in Australia for more than 183 your permanent place of abode would still be in Country X. It therefore follows that you will fail this test of residency. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is: ● A member of the superannuation scheme established by deed under the Superannuation Act 1990 ; or ● An eligible employee for the purposes of the Superannuation Act 1976 ; or ● The spouse, or a child under 16, of a person covered by the above. You and your spouse are not eligible to contribute to the relevant Commonwealth superannuation funds. You will not be treated as a resident under this test. | Detailed Reasoning - Your residency status: As you will not satisfy any of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you will not be a resident of Australia for income tax purposes for the years started 1 July 2017 onwards.