Private ruling: Residency
Date of advice: 5 March 2018
Published: June 2018
Ruling period: Year ending 30 June 2017 | 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 2016

Ruling: Questions and answers | 1. Are you a resident of Australia for the income year ended 30 June 2017? | Yes. | 2. Are you a resident of Australia from 3 July 2017? | No.

Relevant facts and circumstances: General Your country of origin is Country X. You are an Australian citizen. You are a citizen of Country Y. You have not been granted permanent residency by any country. You departed Australia. You were an Australian resident for tax purposes immediately prior to leaving Australia. Prior to leaving Australia you commenced an on-line consultancy business, which is still in the development phase. You presently have a holiday visa, which is in the process of being upgraded to a 3 year spouse visa. You returned to Australia to visit family and your initial visa was expiring. You did not inform the Australian Electoral Commission or Medicare that you were departing Australia. You advised your private health insurance provider to have your policy suspended or cancelled. When completing incoming and outgoing passenger cards, you stated as your residency status that you are an Australian citizen. You will lodge Australian income tax returns while you were overseas.. You plan to spend most of your time overseas during the term of your spouse’s employment contract. You plan to return to Australia once per annum. You plan to return to Australia once your spouse’s contract has terminated. Accommodation The accommodation provided by the employer is a furnished house. In the compound are four houses and four units of similar build (wood panelling with corrugated roofs) of which all are furnished. The accommodation provided by your spouse’s employer is for your exclusive use and is provided rent free. Assets You and your spouse have not sold your home in Australia and are presently renting it out furnished. Apart from your house and bank accounts, you maintain assets in Australia: ● Furniture ● Superannuation You have investments in Australia while you were overseas in Australian shares: You do not receive income from Australian source. You have not advised any 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 have not acquired any assets overseas. Family and social connections You accompanied your spouse. You have no children. You maintain a professional connection with Australia: You have not established any professional, social or sporting connections in Fiji. You have not obtained any overseas qualifications. Employment Neither you nor your spouse ever been employed by the Commonwealth of Australia. You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990. You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976. You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS. You do not have a position or job being held for you in Australia but you operate an online business. The business has an Australian Business Number and is operated by an Australian discretionary trust.

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: There are several factors outlined above which indicate that you have not ceased to be a resident of Australia, specifically: ● You lived and worked in Australia throughout the income year ended 30 June 2017 ● You departed Australia on 3 July 2017 to live with your spouse. For the income year ended 30 June 2017, you were a resident of Australia according to ordinary concepts as you maintained a continuity of association with Australia for that period. For the period 1 to 2 July 2017 you were a resident of Australia for taxation purposes. For the period from 3 July 2017, when you departed Australia for Fiji to live with your spouse, based on a consideration of all of the factors outlined above, you ceased to be a resident of Australia according to ordinary concepts as you ceased to maintain a continuity of association with Australia. | 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. In your case, you were born in Zimbabwe and then moved to England, where you obtained Irish citizenship because you mother is Irish. You then moved to Australia and became a citizen of Australia. Your domicile of origin was Zimbabwe and you changed your domicile first to England and then to Australia. Your domicile will still be Australia while you are living with your spouse in Fiji as you have not indicated that you will be taking any legal steps to change your domicile to that country. | 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. For the period 1 July 2016 to 30 June 2017, you were living and working in Australia. . For this period you were a resident of Australia as you maintained you continuity of association with Australia. For the period from 3 July 2017: ● You have been living with your spouse in Fiji. ● You and your spouse are living in accommodation supplied by her employer. ● Your intention to live in Fiji on an ongoing basis. ● Your home in Australia has been rented out. For the period 1 to 2 July 2017 you were a resident of Australia for taxation purposes under the ‘domicile and permanent place of abode’ test of residency. For the period from 3 July 2017, you were not a resident of Australia under the ‘domicile and permanent place of abode’ test of residency. The Commissioner is satisfied you have a permanent place of abode outside of Australia from 3 July 2017. | 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. For the income year ended 30 June 2017 you were a resident of Australia for 365 days. You were a resident of Australia for tax purposes for this income year. For the income year commencing 1 July 2017, you have not or will not been present in Australia for a total period of more than half of a year of income. Therefore you are not a resident of Australia under the 183-day test from 3 July 2017. | 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. You have stated that 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: For the year ended 30 June 2017 you were a resident of Australia for taxation purposes under the resides, domicile and permanent place of abode and 183-day tests. From 3 July 2017, 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. | Detailed Reasoning - Lodging a tax return and paying tax: For 2017 income year, you will need to lodge an Australia tax return, declare worldwide income, subject to income tax at resident rates, including Medicare levy. For the period you are a non-resident you only need to declare Australian source income, such as rental or interest income or distributions from the trust running the business. | Detailed Reasoning - Tax-free threshold if you are leaving Australia permanently: If you were a resident for part of the 2017 income year, you have a tax-free threshold of at least $13,464. The remaining $4,736 of the full tax-free threshold is pro-rated according to the number of months you were a resident: $13,464 plus $4,736 multiplied by the number of months as a resident of Australia, divided by 12. $13,464 + $4,736 × Number of months as a resident of Australia 12 | Detailed Reasoning - Notes:: 1. You can include any month if you were in Australia for at least 1 day of that month. 2. The tax free threshold for the 2018 income year may change.