Private ruling: Residency
Published: February 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2010

Ruling: Question and answer | Are you a non-resident of Australia for tax purposes while you are living and working overseas? | Yes


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

Reasons for decision: Summary: An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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. These tests are: · the resides test, · the domicile test, · the 183 day test, and · the superannuation test. 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. 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. Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests. | Detailed Reasoning - The resides test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd 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'. You have been living and working in Country X since leaving Australia and accordingly you are not residing in Australia. As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency. | Detailed Reasoning - The domicile 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: Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. 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. Your domicile is Australia because you became an Australian resident in April 2011 and you intend to return to Australia to live here permanently. Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia. | 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 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. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: · the intended and actual length of the taxpayer's stay in the overseas country; · whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; · whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; · whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; · the duration and continuity of the taxpayer's presence in the overseas country; and · the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. The Commissioner is satisfied that you have a permanent place of abode outside Australia because: You are working and living in Country X for a minimum of two years but as your employment contract is open ended it could be longer You are living in permanent rental accommodation since you moved to Country X Your social connections with Country X include family and friends You do not intend to return to Australia for at least the next two years. | 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 nodes not intend to take up residence in Australia. As you have not been present in Australia for more than one-half of the income year you are not a resident under the 183 day test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident of Australia if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) of the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. As you have never been an employee of the Commonwealth of Australia and therefore do not meet the above conditions you are not a resident under this test. | Detailed Reasoning - Conclusion: As you do not meet any of the above tests, you are not a resident of Australia for tax purposes. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia. | Detailed Reasoning - Note: From the date you become a foreign resident any interest and dividend income will be subject to foreign resident withholding tax. If you receive any dividend income and maintain any bank accounts in Australia you should provide the relevant financial institutions with your overseas address.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are a citizen of Country X. | You started residing in Australia in several years ago. | You were granted Australian residency three years after you moved here. | You were offered employment in Country X by the parent company of your Australian employer. | You left Australia to move to Country X to take up employment there. | Your employment contract in Country X does not have an end date. You are intending to stay there for a minimum of two years to increase your career growth opportunities. | While working in Country X your income is earned and paid by the overseas company. This income will also be included on your overseas tax return. | At this stage, you intend to stay in Country X and work there for at least two years. | You are single with no dependants. | You are renting an apartment in Country X. | You have an overseas bank account and a retirement account. | Your Australian assets include a bank account and superannuation account. | You have family and friends in Country X. | In Australia you belonged to a local church group and you continue to stay in touch with your Australian friends. | Prior to leaving Australia you were renting an apartment. | You have not yet returned to Australia since leaving but plan to return for one to two weeks each year until you return permanently to live in Australia. | You are not an eligible employee in the CSS or PSS superannuation scheme.