Private ruling: Residency
Date of advice: 22 February 2018
Published: June 2018
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 February 2015

Ruling: Questions and answers | 1. Are you a resident of Australia? | No | 2. Are you assessable in Australia on the overseas income? | No | 3. If the income from overseas is taxable in Australia are you entitled to a credit for tax paid overseas? | Not Applicable

Relevant facts and circumstances: General Your country of origin is Australia and you are you an Australia citizen. You have not been granted permanent residency by any country. You were employed in Australia until the end of the 2014 calendar year. You resigned from your position and were paid long service leave and annual leave. You departed Australia in early 2015. You entered the foreign country on a visa which did not grant you permanent residency but then obtained another visa which allows you to stay for several years. Your foreign country visa was not supplied by an employer. However your visa was sponsored by your employer in the sense that their undertakings about employment are necessary before the foreign country issues the visa. You applied for the visa yourself, paid for it yourself and you were personally interviewed. ‘Sponsored’ is the term the foreign country uses. As part of your employment you attended conferences, gave lectures and seminars and made research visits. Apart from the foreign country, your destinations overseas included several other overseas countries for which had temporary tourist visas. You did not inform the Australian Electoral Commission or Medicare that you were departing Australia. You did not advise your private health insurance provider to have your policy suspended or cancelled. When completing incoming and outgoing passenger cards: ● When entering Australia you gave your Australian address. ● When entering the foreign country and other countries you gave your foreign country address. You have lodged Australian income tax returns while overseas. You will lodge a foreign country tax returns. Accommodation You privately obtained accommodation in the foreign country. Initially, you had accommodation in Air B&B. Then you and your spouse moved into rented accommodation in an apartment. Initially this was for 12 months. The lease has been extended annually. You have rented the same apartment in foreign country since then. Your overseas employer did not provide you with accommodation. Your house in Australia is left vacant because you use it as a base when returning to Australia each year. You intend to return to it permanently after finishing your years of employment in the foreign country. Assets You and your spouse own a house in Australia. You and your spouse keep your two cars at this address. Your household and personal effects remain in your house in Australia. You paid for all furnishings in the foreign country apartment. You maintain bank accounts in the foreign country for salary deposits and payments of living expenses. You maintain an Australian bank account for bills relating to your house and cars in Australia. You transfer funds from a bank account in the foreign country to your Australian bank account to cover Australian bills. You receive income from Australian sources: ● A little bank interest. ● Dividends. ● Pension payments. You have advised Australian financial institutions including any Australian companies with whom you have investments with that you are a foreign resident so that non-resident withholding tax can be deducted. You will not make any investments in Australia while you were overseas. Apart from household furnishings and bank accounts, you have not acquired any assets while overseas. You have lodged income tax returns while living overseas. You stated your tax residency status as non-resident alien. You will state resident alien for subsequent years. You have superannuation accounts in Australia. You have made non-concessional contributions since departing Australia. Family and social connections Yours spouse accompanied you to the foreign country at the outset and has been with you for the duration to date. You spouse intends to continue to live in the foreign country with you for the duration of your contract. You and your spouse have travelled to Australia for visits to family and friends. You visit your house in Australia and travel to visit your adult children and grandchildren. While the duration of each visit varies, it is usually around Christmas and about several weeks mid-year. You maintain social connections with Australia: ● You are a member of professional organisations. In the foreign country you have professional and social connections: ● Connections through employment. ● Regular sporting partners. ● Memberships of two art galleries. You have obtained an driver’s licence in the foreign country. Employment You have taken up a teaching role on a contract for several years. You are considering ending the contract several months early. Your intention is to return to Australia to retire. Neither you nor your spouse has ever been employed by the Commonwealth of Australia. You do not have a position or job being held for you in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 ● 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 (IT 2650) . 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides (ordinary concepts) 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. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the ‘resides’ test: (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. 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. Based on the facts and a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the period of the ruling. | Detailed Reasoning - The domicile and permanent place of abode test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is 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 or becoming a citizen of the country concerned. As you are still an Australian citizen while living in the foreign country, your domicile is Australia and remains unchanged. | 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you 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. You and your spouse obtained accommodation in the foreign country. Initially, you had temporary accommodation. However, your intention was to obtain permanent accommodation, which you did. You have rented the same apartment since then. Based on a consideration of the relevant facts, the Commissioner is satisfied you have a permanent place of abode outside of Australia. Therefore, you will not be a resident of Australia under the ‘domicile and permanent place of abode’ test of residency for the period of the ruling. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You will not be present in Australia for a total period of more than half of a year of income. Therefore you are a resident of Australia under the 183-day test for the period of the ruling. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (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. Neither you nor your spouse is eligible to contribute to the PSS or the CSS. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not an Australian resident for taxation purposes for the period of the ruling. | Detailed Reasoning - Assessable income of a foreign resident: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident of Australia includes only income derived in Australia during the income year. This means that your income from your employer in the foreign country is not assessable in Australia.