Private ruling: Residency
Published: April 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2010

Ruling: Question and answer | Are you an Australian resident for income tax purposes? | No.

Relevant facts and circumstances: You are an Australian citizen. Your country of origin is Australia. You are applying for permanent residency in Country B. You left Australia in early 20XX. You are currently in Country B on a Y year work permit. You intend to renew this permit and work in Country B for an indefinite period, at least another six years. You intend to eventually return to Australia, perhaps to retire. Your position is with Company X, a Country B company. You reside in Country B and make occasional work trips to Country C and Australia. You pay tax in Country B. You have a spouse in Australia. You are not divorced, nor do you intend to divorce. You lead separate lives. Your spouse owns a house in Australia. Before you moved to Country B you worked overseas temporarily. Your spouse worked, and still does work, offshore. Sometimes you were at their house together, while at other times you were not there together. You have purchased a house in Country B. You do not receive an accommodation allowance or financial assistance from your employer. You do not provide any financial assistance to your spouse. You and your spouse have had joint bank accounts in the past. There are currently two joint bank accounts open: · The first is used by your spouse, and you do not contribute to this. · The second was used for you to transfer funds from Australia to Country B at the time you moved. No funds have been transferred in or out of the account since 20XX. Your spouse does not contribute to this. Your only connections in Australia are your spouse and your adult, non-dependent children. Your connections in Country B include close friends and work colleagues. You belong to professional associations in Country B. Your assets in Country B include bank accounts, a motor vehicle and a house. Your assets in Australia include bank accounts and a share in a property. You sold your investment property and managed fund investments before leaving Australia. You have returned to Australia on numerous occasions for business purposes. On several of these trips you visited other countries as well. On these trips you normally stay at hotels. However, when you are in your home town you sometimes stay at your spouse's house. Your spouse is not always in the house when you stay there, but occasionally you are both there at the same time. In total you spent X days in Australia in the 20XX income year, Y days in the 20ZZ income year, and Z days in the 20VV income year. You will continue to spend approximately the same or less time in Australia on business trips in the foreseeable future. Your spouse has visited Country B a few times. On these visits they spend approximately half the time with you in your house, and half the time holidaying. You and your spouse are not members of a Commonwealth superannuation fund.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1(1). | Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision: Detailed Reasoning - Residency for taxation purposes - general: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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 (and permanent place of abode test), · the 183 day test, and · the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual. If residency is established under the resides test, the remaining three tests do not need to be considered. If residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. 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'. Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia adopts principles and guidelines which can also be used for individuals who intend to reside overseas indefinitely. It states in paragraph 19: The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes. In your case, you have resided in Country B since early 20XX. You have returned to Australia only for business purposes. Your length of physical absence from Australia and the surrounding circumstances are not consistent with residing in Australia. You have taken out a mortgage in Country B, and you disposed of the majority of your Australia assets when you moved. Accordingly, you are not considered to be residing in Australia and, therefore, are not a resident of Australia under the resides test during the income years in question. | Detailed Reasoning - The domicile and permanent place of abode test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's domicile of origin. We consider that your domicile is Australia. A person's domicile of origin will not usually change but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. Taxation Ruling IT 2650 specifies that a person with an Australian domicile who is living outside Australia will retain their Australian domicile if they intend to return to Australia on a 'clearly foreseen and reasonably anticipated contingency' - at the end of a specific period of time for example. In your case, although your intention is to return to Australia, the date of return to Australia permanently is undetermined. Furthermore, although you are in the process of applying for permanent residency in Country B, we consider that you have maintained your Australian domicile. Therefore we need to consider whether you have established a permanent place of abode in Country B. 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. Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include: · 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. In your case: · you have a Y-year permit with your employer in Country B. You plan to renew this permit, and reside in Country B indefinitely, at least for the next six years. · you intend to eventually return to Australia, perhaps to retire. · you have a spouse in Australia, and although you are not divorced, you lead separate lives. You do not support your spouse financially. You have adult, non-dependent children in Australia. · you have a mortgage on a home in Country B, and do not receive any financial support from your employer for accommodation. · your close friends and work colleagues are located in Country B. · you have bank accounts, a car and a house in Country B. · assets that you maintain in Australia include bank accounts kept open for convenience, and a share in a property which you have not sold because it has decreased in value. Based on the above information the Commissioner is satisfied that you have established a permanent place of abode in Country B, and accordingly consider that you are not a resident of Australia for taxation purposes under the domicile test. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days (i.e. half of the income year) 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. Since you left Australia in early 20XX you have been in Australia for the following periods: Remainder of 20XX income year X days 20ZZ income year Y days 20VV income year Z days (to date) You will not be a resident of Australia for taxation purposes under this test because you were not in Australia for more than 183 days during the remaining period in the 20XX income year nor for the 20ZZ income year. You expect to be in Australia for a similar length of time in the foreseeable future; therefore you will not be a resident under this test for the future income years in question. | 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. In your case, you or your spouse are not members of a Commonwealth superannuation fund. Accordingly, you are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - Conclusion - your residency status: Based on the facts in this ruling, you are not considered to be 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 for the income years in question. | Detailed Reasoning - Further issues for you to consider:: Tax-free threshold if you are leaving Australia permanently If you are leaving Australia permanently your tax-free threshold for the year will be lower than the threshold available to most taxpayers who are residents for the full year. For the 20XX income tax year the standard $6000 tax free threshold is apportioned. The new threshold for the taxpayer is calculated by multiplying the number of months the taxpayer was a resident (including the month in which they departed Australia) by $500.