Private ruling: Residency
Date of advice: 27 April 2016
Published: June 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you a non-resident of Australia for income tax purposes from the date of your departure from Australia? | A1: Yes.

Relevant facts and circumstances: Prior to your departure from Australia you were a resident of Australia for tax purposes and had lived with your spouse in Australia for many years. You own the property you lived in with your spouse in Australia. You and your spouse are the only members of a self-managed superannuation fund. You hold no other material assets in Australia apart from your house and the superannuation account balance. You accepted an employment contract in an overseas country for a period of two years with a reasonable expectation that this time period will be extended. The contract requires that you, your spouse and school aged children move permanently to the overseas country throughout the period of employment. You, your spouse and school aged children moved overseas in month 20XX. You expect to enrol your children at a school in the overseas country from day month 20XX. You have finalised a two year lease on an apartment overseas. You expect to live in the one location throughout your period of employment overseas. You expect to have visas and work permits in place overseas throughout the duration of your stay. You expect to open bank accounts overseas to receive your employment income and also to make payments of expenses incurred. You expect to make your property in Australia available for rent through a rental agency as a fully furnished house. You expect to visit Australia to catch up with family and friends and inspect your rental property. Your visits to Australia are expected to be around four weeks in a financial year, using your leave provisions under your employer contract and around three separate visits per financial year. You expect to maintain a bank account in Australia primarily for the collection of rental income and to facilitate payment of Australian rental expenses. You expected that you would transport small portable assets and personal items overseas with you. You expect to close down your self-managed superannuation fund and transfer yours and your spouse's member balances into a public offer fund. Neither you, nor your spouse, have ever been employees of the Commonwealth Government of Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(1) Anti-avoidance rules | The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the MEI low risk PART IVA list as specified in ORCLA.

Reasons for decision: Summary: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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 subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: • the resides test, • the domicile test, • the 183 day test, and • the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. Relevant to your situation are the first two tests which are examined in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia, a copy of which is available from www.ato.gov.au. | Detailed Reasoning - 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; 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 your case, there are various factors that indicate that you will not be residing in Australia during the period you are overseas. These factors include the following: you will be living and working in an overseas country for at least the two years, your spouse and children are living with you in the overseas country, you have a two year lease on a property in the overseas country, you intend to rent out your property in Australia fully furnished and any visits you may make to Australia throughout your employment term overseas will be short and temporary. Based on the facts of your case, the Commissioner accepts that you do not reside in Australia according to the ordinary meaning of the word; therefore, you are not a resident of Australia for taxation purposes. | Detailed Reasoning - The domicile 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. Generally speaking, persons leaving Australia would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile by choice or by operation of law. 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. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." In your case your intended stay overseas is for at least two years. You expect to live in the one location throughout your period of employment overseas. You will be residing there with your spouse and children for a number of years, you intend to open bank accounts overseas and your children will be attending school overseas. Based on these facts, it is therefore considered that you will establish a permanent place of abode in the overseas country. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, we can conclude that you will not satisfy any of the tests of residency. Accordingly you are not a resident of Australia for income tax purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.