Private ruling: Residency
Date of advice: 17 December 2015
Published: March 2016
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: XX XXXX 20XX

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | No.

Relevant facts and circumstances: You are citizen of Australia and another country. You were born in Australia. You departed Australia to live and work in a foreign country. You entered a foreign country with a visa which granted you the right of permanent residency. Your visa was not supplied by an employer. Your intention when you left Australia was to secure a full time job and pursue a career in an industry in the foreign country and reside there for a long period of time, while you build yourself up in that company. You have secured paid employment in your chosen profession and intend to continue residing in the foreign country. Your chosen profession may allow you to move back to Australia in the future if jobs are available, but that will be determined in the future. You returned to Australia after first leaving Australia. The purpose of your visit was to see your family. Your spouse remained in a foreign country. The visit was for a period of less than 183 days. When completing incoming and outgoing passenger cards, you stated as your residency status and address on these documents that you were going to a foreign country and you gave a foreign address. You have not lodged any Australian income tax returns while you have been overseas. Your spouse and you rent an apartment in a foreign country. When you first landed in a foreign country, you stayed with family and friends until you could secure an apartment to live in. Your overseas employer did not provide you with accommodation. Prior to leaving Australia, you were staying with family. You did not have your own home. You and your spouse sold your car, belongings or gave them away before leaving Australia. Your personal effects in Australia were packed up in storage boxes and stored in the garage at your parents' houses. The rest of your personal items you took to a foreign country. You have kept your Australian bank account open. You have told them that you live in a foreign country. You own or have acquired assets while overseas: • a checking bank account • a credit card account • a motor vehicle • household furnishings. In a foreign country you have a spouse but no dependents. In Australia, you have family who did not accompany you. You maintain no professional, social or sporting connections with Australia. You have established professional, social or sporting connections in a foreign country: You obtain any overseas qualifications: • a driver's license • you are currently studying a course paid by your employer. You maintain one professional or occupational membership in Australia. Your employment in a foreign country is ongoing. You do not have a position or job being held for you in Australia. You did not inform Medicare you were departing Australia and living overseas; you didn't know you had to. You will update with Medicare and give them your foreign address. You do not have Australian private health insurance. Once you were living in a foreign country, your family told you of upcoming Australian elections. At that time you wrote a letter to the AEC informing them that you reside in a foreign country and won't be in Australia for the elections. You and your spouse have never been employed by the Commonwealth Government of Australia. You are over 16 years old.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 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. Recent case law decisions have considered the following factors in relation to whether the taxpayer was 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. 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. There are several factors outlined above which indicate that you have ceased to be a resident of Australia, specifically: • You depart Australia with your spouse to live and work in a foreign country. • You entered a foreign country with a visa granted you the right of permanent residency. Your employer did not provide you with the visa. • Your intention when you left Australia was to secure a full time job and pursue a career in an industry; you have such a job and your employment is ongoing. • You returned to Australia once since your departure; to visit your family; your spouse remained in a foreign country. • Your spouse and you rent an apartment in a foreign country. Your employer did not provide you with accommodation. • Prior to leaving Australia, you were staying with family. You did not have your own home. • You and your spouse sold your car, belongings or gave them away before leaving Australia. Your personal effects in Australia were packed up in storage boxes and stored in the garage at your parents' houses. The rest of your personal items you took to a foreign country. • You have kept your bank account open in Australia. You have told them that you live in a foreign country. • You own or have acquired assets while overseas: • a checking bank account • a credit card account • a motor vehicle • household furnishings and personal items. • In a foreign country you have a spouse but no dependents. In Australia, you have family who did not accompany you. • You maintain no professional, social or sporting connections with Australia. • You have established professional, social or sporting connections in a foreign country: • You obtain any overseas qualifications: • a driver's license • you are currently studying a course paid by your employer • You maintain one professional or occupational membership in Australia. Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the relevant period. | 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. As you are still an Australian citizen while living in a foreign country your domicile is Australia and remains unchanged. You also hold citizenship of another country. However, you have not indicated an intention to move there to live and establish that country as a domicile of choice. | 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, based on a consideration of all the relevant facts, you have established a home in a foreign country in rented accommodation where you live with your spouse. You have on-going employment and social connections there. The Commissioner is satisfied you have a permanent place of abode outside of Australia. Therefore, you are not a resident of Australia under the 'domicile and permanent place of abode' test of residency. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, that is 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You returned to Australia after first leaving Australia. Your purpose was to visit family. Your visit was for less than 183 days. Your spouse remained in a foreign country. You have not been present in Australia for a total period of more than half of a year of income. Therefore you are not a resident of Australia under the 183-day test. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You have stated that neither you nor your spouse is eligible to contribute to the PSS or the CSS. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes. | Detailed Reasoning - Assessable income: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that the assessable income of a resident taxpayer includes income from ordinary concepts derived from all sources whether in or out of Australia. For the income year ended 30 June 20XX you received the following income prior to your departure for the foreign country, while you were still a resident of Australia for taxation purposes: • Salary/wages of $X. • Bank interest of $X. Both are ordinary income and are assessable in Australia under section 6-5 of the ITAA 1997. You have stated you will be lodging an Australian income tax return for the relevant income year. As you were a resident of Australia for taxation purposes until the date you departed and the above income was earned while you were still a resident, you will declare both these sources of income in your relevant income tax return. The income you earned since moving to the foreign country was earned after you ceased to be a resident of Australia for taxation purposes and, consequently, is not assessable in Australia. If you have declared the above Australian income in your foreign country income tax return, you may need to apply for an amended assessment. | Detailed Reasoning - Tax-free threshold if you are leaving Australia permanently: Because you departed Australia permanently part way through an income year, your tax-free threshold for the relevant income year will be lower than the threshold available to taxpayers who are Australian residents for the full year. For us to calculate your tax free threshold you will need to complete item A2 - Part-year tax-free threshold on your relevant income tax return: Step 1 Write the date you stopped being an Australian resident for tax purposes in the Date box at item A2 on your relevant income tax return form. In your case, this is the date you departed Australia. Step 2 Write the number of months that you were an Australian resident in relevant (counting the first month during which you stopped being a resident) at label N, item A2. In your case this was some months; write X at label N, item A2 For more information regarding calculating your part-year tax-free threshold for the relevant income year log onto www.ato.gov.au and enter QC 32421 in search.