Private ruling: Residency
Date of advice: 4 June 2018
Published: August 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 October 2017

Ruling: Q1: Are you a non-resident of Australia for income tax purposes from 1 October 2017? | A1: No

Relevant facts and circumstances: Your country of origin is Australia and you are an Australian citizen. You left Australia to take up work overseas. At the time you left Australia, your intention was to remain in this position for two or more years due to limited employment opportunities in Australia. You sold your main residence in Australia and your household effects are in storage. Your spouse remained in Australia and lives with their family. When you return to visit your spouse you stay with their family. You rent accommodation in Country B. You have a vehicle and purchased the necessary goods to live in Country B. You are covered by the employer’s health insurance and receive an allowance through your salary for housing and vehicle expenses. You have removed your name from the Australian electoral roll and advised Medicare. You have advised your bank and investment companies that you are a foreign resident. Your company does not pay for you to visit your family in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) Summary | Prior to taking up this overseas position, you were considered a resident of Australia for tax purposes, your wife remained in Australia while you have taken the opportunity to work overseas as jobs for your skills are hard to find in Australia. Your intention is to work overseas for a few years, based on these facts you are a resident of Australia for income tax purposes. | Detailed Reasoning | Residency | 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. | 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'. | In determining where an individual resides, it should be noted that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. Instead, the test is whether the person has retained a continuity of association with a place in Australia, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation 2002 ATC 2088 ). | 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 still ‘residing’ in Australia during the relevant period: | ● You left Australia with the intention of staying overseas for no more than two or three years; | ● You retain various household items, personal possessions and bank accounts while you are in Country B; | ● You have family in Australia; and | ● You were a resident for tax purposes prior to leaving. | Although you established your own accommodation in Country B, we do not consider that you will be overseas long enough to break your connection with Australia. You retain a continuity of association with a place in Australia, together with an intention to return to that place and an attitude that the place remains home. | Therefore, you are still residing in Australia and remained a resident under the resides test of residency during the period you are overseas. | Whilst it is not necessary to meet more than one test to determine residency for tax purposes, we will also include a discussion of the domicile and permanent place of abode test as an alternative argument. | 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. | 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 Australia and there is no evidence to suggest that you changed your domicile to Country B while you are based there. | Therefore, your domicile is still Australia during the relevant period. | 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. | The Commissioner’s view on what constitutes a permanent place of abode is contained in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650). | Where a taxpayer leaves Australia for an unspecified or a substantial period and establishes a home in another country, that home may represent a permanent place of abode of the taxpayer outside Australia. However, a taxpayer who leaves Australia with an intention of returning to Australia at the end of a ‘transitory’ stay overseas would remain a resident of Australia for income tax purposes. | It is the Commissioner’s view that an overseas stay in excess of two years may indicate that an individual can be considered to have a permanent place of abode overseas, subject to a consideration of all the other relevant circumstances applying to the taxpayer (paragraphs 25 and 27 of IT 2650). | In your case, you went to Country B with an intention of spending no more than two or three years in that country and ultimately will return to Australia to live. Consequently, we do not consider that you will be away from Australia long enough to establish that you have a permanent place of abode outside Australia. | The Commissioner is not satisfied that you have a permanent place of abode outside of Australia and therefore, you remain a resident under this test. | 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 are not a resident of Australia under this test as you were not present in Australia for more than 183 days during the relevant year. | 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. | Your residency status | You continue to be a resident of Australia for tax purposes during the period you are overseas and your assessable income for that period includes income gained from all sources, whether in or out of Australia.