Private ruling: Residency - Departing Australia
Date of advice: 18 April 2017
Published: September 2017
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: No.

Relevant facts and circumstances: You are a citizen of Australia and Country Y. You have been offered, and accepted, employment located in Country X. You have a renewable two year employment contract. Your spouse and dependent children will accompany you to Country X. You and your family intend on leaving Australia for an indefinite period of time, of at least two years. You have not decided when or if you will return to Australia. You are renting your permanent Australian home out while you are in Country X. You will resign from your current employment prior to leaving Australia. You will close most of your Australian bank accounts except one savings account will remain open. You will open at least one bank account in Country X. You will visit Australia once a year which will not exceed 183 days. You will be disposing of most of your possessions prior to leaving Australia. The remaining possession will be taken with you to Country X. You will inform the Electoral Commission that you and your family are leaving Australia and request to be removed from the electoral role. You will inform the Department of Human Services that you and your family are leaving Australia and request that your payments cease. You will close your home phone and internet account and cease using your mobile phone prior to leaving Australia. You will sell your car prior to leaving Australia and purchase another car in Country X. You will retain your home insurance policy and take out Landlord's insurance for your Australian property. Your employer will supply airlines tickets for you and your family to initially travel to Country X. You will be issued with a Work Visa to enter Country X. Upon arrival in Country X, you will be issued with a renewable residence permit. Your family will be issued with residence visas. Your employer will provide furnished on-site accommodation for you and your family. On-site accommodation is a condition of your employment as you are required to be available at all times. You and your spouse are not eligible to contribute to the relevant commonwealth super funds.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6(1) | Income Tax Assessment Act 1997 Section 6-5 Detailed reasoning | 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 derived 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. This includes employment income, rental income, Australian pensions and annuities and capital gains on Australian assets. | 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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: | ● resides test | ● domicile and permanent place of abode test | ● 183 day test and | ● Commonwealth superannuation fund 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. | The resides (ordinary concepts) test | The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3rd 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'. | The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year: | ● physical presence in Australia; | ● nationality; | ● history of residence and movements; | ● habits and 'mode of life' | ● frequency, regularity and duration of visits to Australia; | ● purpose of visits to or absences from Australia; | ● family and business ties with Australia compare to the foreign country concerned; and | ● maintenance of a place of abode. | The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive. | Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia , emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. | Physical presence in Australia | Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia , considers physical presence or length of time by itself is not determinative of residency. An individual's behaviour as reflected by a degree of continuity, routine or habit that is consistent with residing in Australia is relevant. | Frequency, regularity and duration of visits to Australia | You intend to visit Australia once a year during your working holidays which will not exceed 183 days. | Family and business ties with Australia | Your spouse and dependent children will accompany you to Country X. | You will resign from your current employment prior to leaving Australia and will be employed in Country X. | Maintenance of a place of abode | You will move out of your permanent abode in Australia and you will be renting this property out. You will have sold or given away almost all personal possessions and the remaining possessions will be taken with you to Country X. | You will inform the Electoral Commission and the Department of Human Services that you are leaving Australia. | Based on all the facts, your behaviour is consistent with not residing in Australia and being considered a non-resident for tax purposes under the resides test. | 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. | Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. 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 e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would be sufficient evidence of an intention to acquire a new domicile of choice. | You have demonstrated that your domicile will not be in Australia for the following reasons: | ● You will move out of your home in Australia and it will be rented out. You will also obtain landlords insurance for this property. The home cannot be seen to be your permanent place of abode as it will no longer be available for you to reside in. | ● You will not have any personal possessions that will remain in Australia as you will sell, give away or take your possessions with you to Country X. | ● You will sell your car, close existing telecommunications accounts and close most of your Australian bank accounts. | ● You will inform the Electoral Commission and the Department of Human Services that you are leaving Australia. | You have demonstrated that you will have a new domicile by choice in Country X for the following reasons: | ● Your spouse and dependent children will accompany you to live overseas for an indefinite period of time. | ● Your employer is providing you with on-site accommodation which you must reside in as a requisite of your employment contract. | ● You will purchase a car in Country X. | 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. | As discussed above, your intention is to reside in Country X and that will be your usual place of abode. The Commissioner is satisfied that you do not meet the 183 days test due to this and as you plan to visit Australia at most once year, with each visit will not exceed 183 days. You would not be a resident of Australia under this test. | The superannuation test | Under section 6(1) of the ITAA 1936, an individual is still considered to be a resident if that person is: | a) a member of the superannuation scheme established by deed under the Superannuation Act 1990 ; or | b) an eligible employee for the purposes of the Superannuation Act 1976 ; or c) the spouse, or a child under 16, of a person covered by (a) or (b). | You and your spouse are not eligible to contribute to the relevant Commonwealth superannuation funds. You would not be treated as a resident under this test. | Your residency status | As you would not satisfy any of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not a resident of Australia for income tax purposes for the years ended 30 June 2018, 30 June 2019 and 30 June 2020.