Private ruling: Residency
Date of advice: 10 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Were you a resident of Australia for tax purposes for the income year ended 30 June 2016? | A1: No

Relevant facts and circumstances: You were born in Country A and became an Australian citizen in 20XX. You were living and working in Australia before you entered into an employment contract with a company in Country A and commenced work in 20XX. Your intention on taking up the employment contract was to work in Country A and sever all connections with Australia. You had no intention of returning to Australia to live in the foreseeable future. You owned residential property in Australia and rented this out until you sold in December 20XX. The only assets you retained in Australia were a bank account and some shares. You left Australia in 20XX with your family (spouse and children). You did not retain any social or sporting connections in Australia after you left the country. You advised the Australian Electoral Commission to remove your name from the electoral roll. You advised the Australian bank you had an account with that you were leaving the country. You advised the Australian Medicare system you were leaving the country. The last income tax return you lodged in Australia was for the year ended 30 June 20XX. You have never been employed by the Australian Commonwealth government. Towards the end of your employment contract in Country A, you were offered another position with the same company to work in their Country B office which you accepted. You sold your residence in Australia in December 20XX and purchased a new property in January 20XX. Your spouse and children returned to Australia in January 20XX and moved into the new property. You moved from Country A to Country B on XX June 20XX. You were required to travel to Australia for business purposes between XX January 20XX and XX June 20XX. You have rented accommodation in Country B since end of June 20XX. You have not re-enrolled with the Australian electoral commission or the Medicare system.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 ● 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | 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'. The Commissioner may make reference to the following factors in determining whether a taxpayer is a resident under the ‘resides’ test: (i) Physical presence in Australia (ii) Nationality (iii) History of residence and movements (iv) Habits and ‘mode of life’ (v) Frequency, regularity and duration of visits to Australia (vi) Purpose of visits to or absences from Australia (vii) Family and business ties to different countries (viii) Maintenance of place of abode. 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, there are various factors that indicate that you were not residing in Australia during the years in question, specifically: ● you left Australia with no plans to return at any specific time in the future; ● you ultimately lived and worked in Country A from 20XX, then transferred to Country B on XX June 20XX; ● you lived in leased accommodation in Country A which was for your own exclusive use and now lease accommodation in Country B; and ● you rented out your main residence in Australia. Based on the above, you were not residing in Australia during the years in question. Therefore, you were not a resident of Australia under the resides test of residency for the period of the ruling. | Detailed Reasoning - The domicile and permanent place of abode 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. | Detailed Reasoning - Domicile: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case, your domicile of origin is Country A, you obtained Australian citizenship in 20XX, there is no evidence to suggest that you changed your domicile to Country A while you were based in that country. Therefore, your domicile was still Australia during the relevant period. | Detailed Reasoning - Permanent place of abode: 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. 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. In your case, there are various factors that indicate that you had a permanent place of abode outside Australia during the relevant years: ● you lived and worked in Country A for a period of years; ● you lived in leased accommodation in Country A which was for your own exclusive use; and ● you did not maintain a place of abode in Australia. Based on the above, the Commissioner is satisfied you had a permanent place of abode outside Australia during the relevant period. Therefore, you were not a resident of Australia under the domicile and permanent place of abode test of residency for the period of the ruling. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. You were not a resident of Australia under this test as you were not present in Australia for more than 183 days during the relevant year. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You were not a resident under this test for the relevant year. | Detailed Reasoning - Your residency status: You were not an Australian resident for taxation purposes for the income year ended 2016.

ATO view documents: Taxation Ruling IT 2650 – Income tax: residency – permanent place of abode outside Australia