Private ruling: Residency
Date of advice: 14 May 2018
Published: July 2018
Ruling period: Year Ending June 30 201X | Year Ending June 30 201X
Date scheme commenced: 14 April 201X

Ruling: Q1: Are you a resident of Australia for income tax purposes whilst working overseas in country x? | A1: No

Relevant facts and circumstances: You are an Australian citizen You were born on xx/xx/19XX You have a spouse and a child who are also Australia citizens Your employer required you to relocate overseas to country x under a secondment arrangement to be head of operations in the 201X/1X financial year. You departed Australia in the 201X/1X financial year. Your transfer was to be for a minimum period of 2 years and then a decision would be made on whether the transfer would be extended or you would return to Australia. You are not a member of the superannuation scheme established by deed under the superannuation 1990 and you are not an eligible employee for the purpose of the superannuation act 1976 nor are your family. Your spouse and child departed Australia in the 201X/1X financial year. You and your spouse intended on living overseas for a long period of time. Your original intention was for 5 years and then you would consider moving to another country altogether. You marked that that you were leaving Australia permanently on the departure form when you left Australia. You have an interest in an apartment that you lived in until your departure. You rent the apartment to a third party under a long term lease. You have 1 ABC Home loan, 1 ABC Credit Card, 2 ABC bank accounts, 1 XYZ account, 2 EFG accounts and 1 EFG line of credit in Australia. They were not closed when you departed. While in country x you have opened a EFG account, a XX credit card and a XX bank account. The mailing address for ABC and EFG was updated to your address in country x. EFG accounts in Australia weren’t closed because they were needed to maintain the ease of transferring funds from country x back to Australia. The ABC account was kept open to facilitate the funding of the home loan. You had a car but you sold it before leaving the country. You sold furniture before departing Australia and stored the rest of your belongings at your parents’ house. You removed yourself from the electoral roll on departure. You were receiving the childcare rebate but it cancelled when you departed Australia. You have not returned to Australia since you left in the 201X/1X financial year. You have a residency visa that allows you to remain in country x for 3 years. You stayed at an Airbnb accommodation in country x for approximately 4 weeks until you found a rental property that you now have a 12 month lease on. Your spouse works as a teacher for a school in country x. Your child attends school in country x. You have personal belongings in country x as you believed you would be there for a considerable time. You were employed under a local employment contract in Country x. You were paid in the currency of country x during the period of your employment in country x. Your wages were paid into your XX bank in country x. You have kept approximately 92-96% of your income in the country x to date. Approximately 4-8% of you income was transferred to your Home loan in Australia. At the time of departure you did not have employment to return to in Australia. You did not join any clubs or associations overseas and you weren’t a member of any in Australia prior to your departure. Your employer has since decided to move operations to country x. You and your family will travel to country x for approximately 2 months in the 201X/1X and 201X/1X financial year. During that time you’ll continue to be paid and it will be into your bank account in country x. In during the 201X/1X financial year you and your family will relinquish the country x property you have been renting. You and your family will be residing in Airbnb accommodation in country x for 2 months in the 201X/1X and 201X/1X financial year. You have applied for a new role in Australia. You expect to return to Australia in the 201X/201X financial year.

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

Reasons for decision: Summary: An Australian resident is defined in subsection 995-1 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 paragraph 6(1)(a) 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 ● 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 if they meet the conditions of one of the other three tests. | Detailed Reasoning - 1. 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; have 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’. In your case, you were employed in country x where you had a contract for a minimum of two years and were expecting to remain longer, you were not dwelling permanently nor had a settled place of abode in Australia during the period you were working in country x. Therefore, you will not be residing in Australia during that time. | Detailed Reasoning - 2. The domicile test: Generally, if a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: 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. 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. In your case, your intention was to stay overseas for up to 5 years. Although you maintain an association with Australia through your family and your rental property, your associations with country x were more significant since: ● you obtained an employment contract to work full time ● your family accompanied you to country x ● you leased a home in country x ● you set up bank accounts in country x Based on these facts, you will have established a permanent place of abode in country x. Therefore, you are not a resident of Australia for tax purposes under the domicile test. | Detailed Reasoning - 3. 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 not present in Australia for 183 days from the time you left until the time you plan to return in in the 201X/1X financial year. | Detailed Reasoning - 4. The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. In your case, you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person. | Detailed Reasoning - Your residency status: As you are not an Australian resident for income tax purposes under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you will not be considered to be an Australian resident from the time you departed in the 201X/1X financial year to the point you plan to return in the 201X/1X financial year.