Private ruling: Residency
Date of advice: 10 August 2017
Published: November 2017
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you an Australian resident for tax purposes? | A1: No

Relevant facts and circumstances: You are a citizen of Australia and Country X. You intend to live in Country X for the foreseeable future. You informed the Australian Electoral Commission and Medicare that you were departing Australia. You maintain a bank account in Australia to receive your salary. You have some other Australian bank accounts which you don’t currently use. You sold your car before leaving. You sold some of your household goods and the remainder were shipped to Country X. Your personal goods were shipped to Country X. You maintain no other significant assets in Australia. You are currently sharing a house with your in-laws. Your spouse and three children moved with you to Country X. You have opened bank accounts in Country X. You have bought a car in Country X. You were previously renting in Australia, then stayed with friends a few months before leaving. You will only return to Australia as needed by your employer. You work full time for an Australian company serving Australian customers. You have no occupation in Country X.

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

Reasons for decision: 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 36).. 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 compared 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 , 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. Physical presence in Australia TR 98/17 - Income tax: residency status of individuals entering Australia considers physical presence or length of time by itself is not determinative of residency. An individual's behaviour as reflected by a degree of continuity, routine or habit that is consistent with residing in Australia is relevant. You left Australia in mid-201X and have no intention to return except for limited work purposes. Nationality You are a citizen of both Australia and Country X. Family and business ties with Australia Your spouse and children have moved with you to Country X. Your employer is Australian and you service Australian clients, though you do all of your work from Country X. Maintenance of a place of abode You do not have an abode in Australia and if you return on temporary visits to Australia you will stay with friends. You have sold or moved all your personal assets to Country X where you now live with your in-laws. Habits and 'mode of life’ You maintain some bank accounts in Australia to receive your salary. You have also opened accounts in Country X to help with day to day life there. You have informed Medicare and the Australian Electoral Commission that you are leaving Australia indefinitely. Based on all the facts, your behaviour is consistent with not residing in Australia under the test. | 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 Country X citizenship which allows you to stay permanently in Country X and have no intention to return to Australia. You have not maintained an abode in Australia, and have moved or sold all of your personal and household effects to Country X. You are living with family in Country X and your children and spouse moved with you. You have shown that you have taken up a place of abode outside of Australia due to living there with your family and having no intention of returning to Australia. You have acquired a new domicile 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. As discussed above, your intention is to reside in Country X and that will be your usual place of abode so the 183 day test will not apply in these circumstances. | 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 would 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.