Private ruling: Residency
Published: May 2015
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 20YY

Ruling: Q1: Are you a non-resident for Australian tax purposes? | A1: Yes | Q2: Did you become a non-resident in Month A 20XX? | A2: Yes

Relevant facts and circumstances: Your country of origin and birth is Country A. You were granted permanent Australian residence in 200X. You are a citizen of the Country A and Australia (granted in 20XX). You and your spouse purchased an Australian dwelling in 200X and lived there until your departure from Australia. You signed a contract for a employment role with Company A in Country B in 20YY. The employment was set to commence no later than Month A 20XX. Your employment contract is permanent and does not have a fixed term. In Month A 20XX you departed Australia for Country B, and you commenced your employment with Company A in Month A 20XX. Your spouse and children did not accompany you to Country B at this stage. You were granted official residence in Country B in Month A 20XX, via sponsorship from Company A. You also received an employer sponsored visa that allowed you and your family to live and work in Country B indefinitely. You rented an apartment in Country B on your arrival and remained there until you returned to Australia a number of months later to relocate your family. You had intended to relocate your family when you first moved to Country B but your children were unable to enrol in Country B's school system until the new school year. Your spouse and children stayed in Australia for a number of months only because of Country B's school system. You returned to Australia in Month B to assist your family relocate before departing again for Country B. Your family arrived in the Country B shortly after you. Your Australian dwelling was rented out under a lease agreement. You and your family lived in temporary accommodation in Country B from the day you arrived until your organised permanent accommodation in Country B. You signed a lease on a dwelling in Country B and moved in with your family. You have fully furnished the Country B dwelling with new items and items shipped from Australia, relocated the family's pets from Australia to Country B, you own cars in Country B, and you and your spouse have a bank account and credit cards in Country B. You intend to stay in Country B indefinitely as you do not want to put your family through the stresses of another international move, and your children are at important stages of their education. No return tickets to Australia have been purchased. Your Australian assets include your Australian dwelling, a bank account to receive rent and pay the mortgage, superannuation, and shares issued to you by a previous employer. All household effects, motor vehicles and other assets have been sold or relocated. You and your spouse do not have Australian government connections, and therefore are not a member of a Commonwealth Government Super Scheme. In 20ZZ you notified the Australian Electoral Commission of your overseas residence, and have been removed from the electoral roll. Your spouse has also been removed from the electoral role. You have not yet advised the bank or the share registry that you are a non-resident. You have advised your private health insurance provider that you and your family are non-residents. You are yet to advise Medicare you are a non-resident as there was some confusion that you would not need to do this but you will attend to it now.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6(1) | Income Tax Assessment Act 1936 Subsection 6-5(3) | Income Tax Assessment Act 1936 Subsection 6-5(3)(b) | Income Tax Assessment Act 1997 Section 995-1(1)

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides 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 it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, the Commissioner accepts that you were not residing in Australia according to the ordinary meaning of the word from Month A 20XX. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. In your case, you formed an intention to make the Country B your home indefinitely when you signed a permanent employment contract with Company A, and moved to the Country B in Month A 20XX. You obtained official residence in Month A 20XX and a Country B employer sponsored visa that allowed you and your family to live and work in Country B indefinitely. The fact your family did not relocate with you in Month A 20XX does not impact your intention to make the Country B your place of abode at this date. It is considered reasonable that your spouse and children remained in Australia until such time the children could enrol in a school in Country B. Although you did return to Australia some months later to assist your family relocate, and attend to other matters, you were not returning on a regular basis that would indicate an intention to maintain Australia as your place of abode. Therefore, from Month A 20XX you are a non-resident under the domicile test. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You were in Australia for more than 183 days in the 20XX financial year. However, it is considered that your usual place of abode was outside Australia from Month A 20XX, and therefore you were a non-resident from this date. | Detailed Reasoning - Superannuation test: Based on the facts you have provided this test is not relevant in your situation as it only applies to persons eligible to contribute to the superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 from 21 March 2014. Therefore, you are considered a non-resident for Australian tax purposes from this date. | Detailed Reasoning - Taxation requirements of a non-resident: Subsection 6-5(3) of the ITAA 1997 states: If you are a foreign resident, your assessable income includes: (a) the ordinary income you derive directly or indirectly from all Australian sources during the income year; and (b) other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source. In your case, the rental income you earn from your Australian property will be assessable income in Australia. You will be required to pay non-resident tax on this income, and any other income covered under subsection 6-5(3) of the ITAA 1997. The ordinary income you earn whilst working in Country B will not be assessable, and therefore not taxable in Australia unless it is covered by a provision in subsection 6-5(3)(b) of the ITAA 1997.