Private ruling: Residency
Date of advice: 24 May 2016
Published: July 2016
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you a resident of Australia for income tax purposes from the day you left Australia for an overseas country? | A1: No.

Relevant facts and circumstances: You are an Australian citizen. You moved overseas and commenced a new employment contract overseas. Your employment contract with your overseas employer is for over two years. You have no fixed plans after the end of your employment contract. Your employment contract includes an option to be rehired. You have a work visa which is valid for the duration of your contract. You have adult children who both live and work overseas. You have rented a house overseas exclusively for you and your spouse's use for the duration of your employment contract. The lease is in the name of your employer. You receive an allowance as part of your remuneration package which covers a portion of the housing cost and the reminder you pay yourself. Your employer pays the housing allowance directly to the landlord on your behalf. Your employer paid the upfront property bond and recharged this to you. The overseas rental property was unfurnished and you have purchased furniture, white goods, electrical goods and appliances for the property. You and your spouse have installed internet and incurred electricity and water rates in your name at the overseas property. You have a mobile phone contract in the overseas country. You and your spouse personally incur the cost of groceries in the overseas country. You have purchased vehicles in the overseas country for daily use, registered and insured in your name. You have joined various clubs overseas. You have private health insurance in the overseas country. You opened overseas bank accounts. You have retained the majority of your cash and investments in Australia as this is where you ultimately wish to retire to. You have some cash in overseas countries. For a period of time you were remitting your salary, net of any living expenses, to Australia via a loan to your Australian investment entity, to be invested in Australia. After a period of time you have been banking your salary in the overseas country and have not been remitting any to Australia. Since moving overseas you have maintained two cars in Australia which are registered and insured in your spouse's name. Both yours and your spouse's family members use the cars as second cars. You omitted to notify your financial institution and registries that you had ceased to reside in Australia since departing but at a later date you had remedied this. Your mailing address is a PO Box in Australia which family check and you have elected to receive as much of your mail as possible via email. Where necessary, your family courier the mail to you. You had initially omitted to have yourself removed from the electoral roll since relocating but remedied this at a later date. You suspended your private health insurance when you departed Australia. Of occasion you reactivate your private health insurance when in Australia visiting and then re-suspend it again. You jointly own two properties in Australia with your spouse. Your main residence in Australia has been left vacant and is used by you, your spouse and other family members when visiting from overseas You do not have a financial need to rent out the property that was your main residence in Australia prior to departing. You have retained the property as convenient accommodation for yourself and your extended family. No one permanently lives in the property. Your furniture primarily remained in the Australian property and only limited personal effects - clothing and personal items - were shipped overseas. Your other Australian property has been retained for use as a holiday house for use by your extended family. You have not rented out the property. Your and your spouse's family have been using the property as a holiday house. You have maintained the phone and internet connection at the Australian properties due to the ongoing use of the properties by family members. You have maintained some memberships in Australia and have only utilised one membership once since departing Australia. You have Australian superannuation in a pooled fund but neither you nor your employer has made any contributions since you departed Australia. For a period of time you made some infrequent visits to Australia. You took limited personal effects with you when you visited Australia. You expect to have a similar schedule for trips to Australia for later periods of time. You also travelled outside of the overseas country and Australia on a number of occasions during a period of time for attendance at work related events and to visit family. You or your spouse do not have a superannuation account with the Commonwealth Service Superannuation scheme nor are you a member of the Public Sector Superannuation scheme.

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

Reasons for decision: Summary: 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). Section 6-5 of the ITAA 1997 provides that where you 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 ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: • the resides test, • the domicile 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. | Detailed Reasoning - The resides (ordinary concepts) 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 and your spouse have gone overseas for work purposes, you intend to be overseas for over two years, you are living in long term accommodation and you have physically spent the majority of your time in the overseas country. Based on the facts above you will not be residing in Australia according to ordinary concepts. | 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. Generally speaking, persons leaving Australia would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile by choice or by operation of law. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." Paragraphs 13 and 14 of Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia discuss the FCT v Applegate (79 ATC 4307; (1979) 9 ATR 899) case. The Federal Court rejected the Commissioner's argument that a permanent place of abode outside Australia required an intention to live outside Australia indefinitely without any intention of returning to live in Australia, other than at some remote, albeit specific point in time. 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 their 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. Taxation Ruling IT 2650 states the following factors need to be taken into account: (a) the intended and actual length of the individual's stay in the overseas country; (b) any intention either to return to Australia at some definite point in time or to travel to another country; (c) the establishment of a home outside Australia; (d) the abandonment of any residence or place of abode the individual may have had in Australia; (e) the duration and continuity of the individual's presence in the overseas country; and (f) the durability of association that the individual has with a particular place in Australia. 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. Your domicile of origin is Australia. The Commissioner is satisfied that you had a permanent place of abode outside Australia for the following reasons: • You are renting a property overseas for the duration of your employment contract • You have purchased furniture, white goods and electrical goods for your use overseas • You intend to reside overseas for over two years • Your spouse has accompanied you overseas • You have opened bank accounts, joined associations, purchased vehicles and obtained private health insurance overseas • After a period of time you informed your Australian financial institutions and registries and the electoral roll that you had ceased to reside in Australia • You have and will be visiting Australia infrequently for short periods of time. Whilst you have maintained the majority of your investments and connections with Australia - visiting family infrequently, continuing the ownership of your properties, furniture, vehicles and bank accounts and investing some of your overseas salary into your investment entity in Australia you have done so as you eventually plan to retire to Australia. As you have highlighted the maintenance of assets in Australia was considered in Administrative Appeals Tribunal Case 4834 (1988) 89 ATC 196 (Case W13), and it was considered that whilst the applicants had retained asset in Australia, including supermarket premises, their house and furniture and some rental proceeds that in every other sense the applicants were living outside of Australia during those years and the period was long-term and indefinite. As these circumstances support the view that your permanent place of abode is outside Australia, you are not a resident of Australia for tax purposes under the domicile test. In your case if you were to rent out your Australian properties rather than retain them this would not change your residency status granted all other facts were the same. | 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. You were physically present in Australia until you departed. Therefore for the year ended 30 June 2015 your presence in Australia exceeded 183 days. However, you and your spouse have left Australia indefinitely and have permanent work and established a home overseas. Until you left Australia your usual place of abode was your home in Australia; it cannot be said that your usual place of abode was in the overseas country during that year. Under the 183 day test you were a part-year resident. Your Australian residency ceased from the date you departed. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation scheme or the Commonwealth Service Superannuation scheme, 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 and your spouse are not eligible to contribute to the relevant Commonwealth Superannuation funds. You are not a resident under this test. | Detailed Reasoning - Your residency status: From the day you departed Australia for the overseas country you are not a resident of Australia for taxation purposes.