Private ruling: International - residency and leaving Australia
Published: May 2015
Ruling period: 1 May 2013 to 30 June 2013 | 1 July 2013 to 30 June 2014 | 1 July 2014 to 30 June 2015 | 1 July 2015 to 30 June 2016 | 1 July 2016 to 30 June 2017 | 1 July 2017 to 30 June 2018

Ruling: Questions and answers | Are you a resident of Australia for income tax purposes under section 6(1) of the Income Tax Assessment Act 1936 ? | No.

Relevant facts and circumstances: You commenced a position with Company X Group Y entered into the intended Overseas Agreement with Entity Z and business commenced for a period of 3 years. The Overseas Agreement was extended. Your company, wholly owned by you, owns shares in Entity Z and you are a director of Entity Z. You resigned your position at Company X and moved to the overseas position. You ran Group Y which you (indirectly) own jointly with person Q. You continued to live and work full time overseas running the overseas business and are a registered taxpayer in the overseas country and have filed income tax returns. When you initially moved overseas you entered into a lease for an apartment. You then purchased and moved into a sub-penthouse apartment and you and your spouse are the registered Proprietors. You have been living permanently in the overseas apartment. You have completely furnished and renovated the overseas apartment. In the first few months of your living overseas, you were primarily utilising the matrimonial funds held in the Australian bank accounts and credit cards for your personal living expenses. You opened a personal bank account in the overseas country to provide for your overseas banking needs. You purchased a motor vehicle in the overseas country, despite being supplied with a fully maintained company vehicle. You purchased a second motor vehicle in the overseas country. You obtained an unrestricted driver licence in the overseas country. Your personal memberships in Australia are now registered to your permanent address overseas. You hold private health insurance in the overseas country. You have not filed a Taxation Return in Australia since leaving Australia. You are currently joint or part registered proprietor of various freehold properties in Australia. They are as follows; • You purchased a property which is jointly owned by you and your spouse. The property is leased to a family member pursuant to a Residential Tenancy Agreement. You intend to retain this property. • You purchased a property, the property is owned jointly with family members. The property is a 'lifestyle asset' and is to be retained to be used on an intermittent holiday basis. It is also used on an intermittent holiday basis by family and friends. In the last few years you have been to the property for less than 15 days. • You purchased a property and it is owned by you and your spouse as joint proprietors. The property is a 'lifestyle asset'. The Property is to be retained to be used on an intermittent holiday basis. It is also used on an intermittent holiday basis by family and friends. In the last few years you have been to the property for less than 15 days. You joined a super fund upon commencing employment at Company X. Contributions are no longer made to this Fund since you ceased employment. You established a Self Managed Super Fund (SMSF) with you and your spouse appointed as Trustees. Limited activity occurred in the SMSF until a corporate trustee was appointed as the new Trustee of the Super Fund. You have disposed of all of your vehicles in Australia, apart from a car supplied by you to your parents for their exclusive use. Over any chosen 12 month period since living overseas, you have met the "183 day rule" of residency in the overseas country. You and your spouse decided that your spouse would remain in the current employment due to the reduced monthly earnings following your resignation from Company X. Primarily due to the start-up nature of the Entity Z business, you and your spouse decided that your spouse should not initially relocate to the overseas country as the income from your spouse's employment was vital to the family expenses and outgoings. Your spouse then took an extended leave of absence from employment; you spouse and family pet moved overseas to live with you. At this stage, the leave of absence is for an initial term, however this may be extended. It is the intention of your spouse that the employment will eventually be abandon in Australia to join you overseas however, at this stage, the family, your spouse, is considering the financial and future employment prospects prior to abandoning such a long and important career and substantial source of income. Given the family home has been leased out, your spouse and the family pet now live with you in the overseas country and a large portion of your spouse's clothing and personal effects have been moved overseas. Your spouse has also obtained a drivers licence, health insurance, credit cards and bank account and joined numerous gyms and health clubs in the overseas country. You and your spouse are not eligible employees of the Commonwealth of Australia.

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

Reasons for decision: Summary: 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 an Australian resident for income tax purposes. These tests are: • The resides test • The domicile test • The 183 day test • The superannuation 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 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. You resigned your position with Company X and immediately moved overseas. Your company, wholly owned by you, owns shares in Entity Z and you are a director of Entity Z. On moving overseas you initially entered into a lease for an apartment, however, you have purchased and moved into another apartment in which you and your spouse are the registered Proprietors and where you permanently reside. You completely renovated and furnished the overseas apartment. You have opened a personal bank account in the overseas country, purchased motor vehicles, despite being supplied with a fully maintained company vehicle and obtained an unrestricted driver licence in the overseas country. You are a registered taxpayer and have filed income tax returns in the overseas country. Your spouse has taken a leave of absence from employment in Australia and with the family pet and a substantial amount of belongings has moved to the overseas country. Although, your spouse may return to the Australian employment as the income is required to assist covering the family expenses. Your spouse has also obtained a drivers licence, health insurance, credit cards and bank account and joined numerous gyms and health clubs in the overseas country. Accordingly; we consider that you reside in the overseas country and are a non-resident of Australia. | 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. Your domicile of origin is Australia, however, based on the facts the Commissioner is satisfied that you have a permanent place of abode outside of Australia. You are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days during an income year, the person will be a resident of Australia for taxation purposes 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. You have been living and working in the overseas country and have not been in Australia for 183 days during any financial year. Consequently, you will not be resident of Australia for taxation purposes under this test. | Detailed Reasoning - The superannuation test: Under this test, an individual will be considered a resident of Australia for taxation purposes if: 1. they are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990 , 2. they are an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976 , or 3. they are 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 and your spouse are not a member of the PSS or an eligible employee for the purposes of the CSS. Accordingly, you are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - Your residency status: The Commissioner is satisfied that you are not a resident of Australia for taxation purposes.