Private ruling: Residency
Date of advice: 8 September 2017
Published: January 2018
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: Spring 2017

Ruling: Q1: Are you a resident of Australia for income tax purposes after you depart Australia? | A1: Yes

Relevant facts and circumstances: You were born in Australia and hold Australian citizenship. You are not a citizen of any other country. You work for an Australian entity and in Spring 2017 you will depart for Country A. Although you will hold a visa which entitles you to stay for up to 4 years, the term of your appointment is 2 years. At the conclusion of your appointment you expect to return to Australia where you will resume your work with your current employer. In Australia you live in your own house which will be rented when you depart. This house will be rented. You will continue to pay the mortgage on this house while away from Australia. Your furniture has been sold and your personal possessions (such as books and bedding) have been placed into storage. While overseas you will live in a furnished apartment which will be leased by your employer. You will pay rent for this apartment, this rent will be paid from your after tax income. Your mail will be re-directed to your overseas address. Your only assets overseas will be your personal effects and a bank transaction account. Your salary will be paid into an Australian bank account and partly into your Country A account. Your superannuation will continue to be made as per current arrangements. You are single and no family will accompany you overseas. Your friends and family will remain in Australia. You intend to retain your name on the Electoral Roll and will continue to vote as normal whilst overseas. You have not advised any entity of your residency status when you depart Australia. You will not be obliged to pay tax or lodge a tax return in Country A during your overseas work.

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

Reasons for decision: Summary: 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 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 Income Tax Assessment Act 1936 (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. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - Resides 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. 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 compared to the foreign country concerned; and ● Maintenance of a 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. In your case, you are a citizen of Australia who will maintain a residence in Australia and friends and family will remain in Australia. Based on all the facts, it could be argued that, on balance, your behaviour is consistent with not residing in Australia and being a non-resident for tax purposes under the resides test after leaving Australia. Before this date you maintained an enduring association with Australia as you had an abode in Australia which continued to be occupied by yourself. We will now consider the ‘domicile and permanent place of abode’ test as an alternative argument. | Detailed Reasoning - The domicile test: Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: “Domicile” is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person’s domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice. In your case, you are an Australian citizen who will be departing Australia for a specific period and then returning to Australia. You have not abandoned your domicile in Australia and acquired a domicile of choice overseas. Your visa allows a longer stay however you will only stay overseas for 2 years. During this time you will live in a furnished apartment leased from your employer. You will take only personal effects. These facts show that you have not established a home indefinitely in another country. Rather you are establishing a temporary home to allow you to take up a short-term appointment. | Detailed Reasoning - Permanent place of abode: A person’s ‘permanent place of abode’ is a question of fact to be determined in the light of all the circumstances of each case. ( Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 ( Applegate )) In Applegate , the court found that ‘permanent’ does not mean everlasting or forever but it is to be contrasted with temporary or transitory. The courts have considered ‘place of abode’ to refer to a person’s residence, where he lives with his family and sleeps at night. Taxation Ruling IT 2650 Income Tax: Residency – Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual’s permanent place of abode. These factors include: (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 intended and actual length of the individual’s stay in the overseas country; (d) any intention either to return to Australia at some definite point in time or to travel to another country; (e) the establishment of a home outside Australia; (f) the abandonment of any residence or place of abode the individual may have had in Australia; (g) the duration and continuity of the individual’s presence in the overseas country; and (h) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer’s children, family ties. Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors. Based on all the facts, the Commissioner is satisfied you have not established a permanent place of abode in another country. Therefore you are a resident of Australia under this test. | Detailed Reasoning - The 183 days 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. In your circumstances your travel to Australia will be limited to relatively brief visits. Accordingly, you will not be treated as a resident under this test for the period you are working overseas. | 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 (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You will not be a resident under this test. | Detailed Reasoning - Residency status: As you satisfy one of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you will remain a resident of Australia for income tax purposes when you depart Australia.