Private ruling: Residency
Published: September 2014
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Questions and answers | Will you be a resident of Australia for taxation purposes while you are living and working overseas? | No.

Relevant facts and circumstances: You moved to Australia from foreign country A and became a citizen of Australia. You are leaving Australia to work for a new company based in foreign country B as a project manager. In foreign country B your employer will be a company. The period of employment with them is indefinite. Your employment with them can be extended as one project reaches completion you will start on another. You are waiting for your final signed contract. You will not return to Australia within the next 5 years. You intend to work for several years in foreign country B and a further years in other countries, depending on the availability of jobs. You formed the intention to make your home indefinitely outside Australia. You will enter foreign country B on a sponsored visa. This visa will permit you to stay permanently in foreign country B whilst you are employee there. Prior to your departure you lived your family home. You have a spouse and a child. They will join you as soon as your Australian house (main residence) is sold. They will live in the main residence until it is sold. Up to that time you will transfer money to Australia for the family expenses. Once the house is sold and all the financial matters are cleared, you and your spouse will close all your Australian bank accounts. In foreign country B, you will live in rented accommodation. Your employer will not provide you with accommodation. You currently have no assets in foreign country B but you will have a motor vehicle, household effects, and a bank account. Your assets in Australia will be disposed of: a motor vehicle, household effects, and a bank account. You will take your household effects with you to foreign country B. You ceased paid employment in Australia. You do not have a job being held for you in Australia. You spouse will not be in paid employment. You do not hold a return airline ticket. You will lodge tax returns in foreign country B. You have no plans as yet to visit Australia after your departure but may return for a weekend to finalise the sale of your house. You will lodge your final Australian tax return. Your social and sporting connections with Australia are family and friends. Your social and sporting connections you will have with foreign country B are friends. Neither you nor your spouse is an eligible employee in the CSS or a member of the PSS. You are over 16 years of age. You will to advise the Australian electoral office to have your name removed from the electoral roll. You will advise financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted. However, it is your intention to close all your Australian bank accounts. You do not have investments in Australian companies and no investment apart from your superannuation. You will advise Medicare to have your name removed from its records. When completing the Australian Immigration Outgoing passenger card you stated you were departing Australia permanently to live in foreign country B.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: 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' and 'permanent place of abode' test; • the 183 day test; and • the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. 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 considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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 with Australia compared to the foreign country concerned; and (viii) maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35): Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances. | Detailed Reasoning - (i) Physical presence in Australia: It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088 , the Tribunal stated (at 2090): Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home. In your case: Prior to your departure you lived in a house in Australia. You are leaving Australia to work for a company in foreign country B. In foreign country B your employer will be a company. The period of employment with them is indefinite. Your employment with them can be extended as one project reaches completion you will start on another. You are waiting for your final sighed contract. You will not return to Australia within the next five years. You intend to work for two years in foreign country B and a further years in other countries, or foreign country B, depending on the availability of jobs. You formed the intention to make your home indefinitely outside Australia. You will enter foreign country B on a sponsored visa. This visa will permit you to stay permanently in foreign country B whilst you are employee there. You have a spouse and a child. They will join you as soon as your Australian house (main residence) is sold. Once the house is sold and all the financial matters are cleared, you and your spouse will close all your Australian bank accounts. In foreign country B, you will live in rented accommodation. Your employer will not provide you with accommodation. You currently have no assets in foreign country B but you will have a motor vehicle, household effects, and a bank account. Your assets in Australia will be disposed of: a motor vehicle, household effects, and a bank account. You ceased paid employment in Australia. You do not have a job being held for you in Australia. You do not hold a return airline ticket. You will lodge tax returns in foreign country B. You will lodge your final Australian tax return. You have no plans as yet to visit Australia after your departure but may return for a weekend to finalise the sale of your house. | Detailed Reasoning - (ii) Nationality: You were born in foreign country A and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence and movements: You are leaving Australia to live with your family and work in foreign country B. You do not have any plans to return to Australia apart for a weekend to organise the sale of your home. | Detailed Reasoning - (iv) Habits and 'mode of life': You are leaving Australia to live with your family and work in foreign country B. In foreign country B your employer will be a company. The period of employment with them is indefinite. You will establish a home there in rented accommodation. You do not have any plans to return to Australia apart for a weekend to organise the sale of your home. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You do not have any plans to return to Australia apart for a weekend to organise the sale of your home. | Detailed Reasoning - (vi) Purpose of visits to and absence from Australia: To organise the sale of your home. | Detailed Reasoning - Family: Your spouse and child will accompany you to foreign country B. | Detailed Reasoning - Business or economic: In foreign country B: You will be employed in foreign country B. You will open a bank account. You will lodge tax returns. In Australia: Once your family home is sold, you will close your Australian bank accounts. | Detailed Reasoning - Assets: In Australia: You will sell your family and then you will close your Australian bank accounts. Your superannuation. Overseas: • a bank account • a car • household goods. | Detailed Reasoning - (viii) Maintenance of a place of abode in Australia: You will sell your family home. | Detailed Reasoning - Summary of the resides test: As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning. Based on the above, you will not retained a continuity of association with Australia while you are living and working overseas and you will not be residing in Australia according to the ordinary meaning of the word. Therefore, you are not a resident of Australia under the 'resides' test of residency. | Detailed Reasoning - The domicile test: 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. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. Your domicile of origin is foreign country A. A domicile of choice is adopted when you become a citizen of a new country or apply for permanent residency in a new country. Your domicile of choice is Australia because became a citizen of Australia and have been living here prior to going overseas to live and work. 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. You have formed an intention to make your home indefinitely outside Australia and you do not have any plans to return to Australia apart for a weekend to organise the sale of your Australian home. The Commissioner is satisfied that you have a permanent place of abode outside Australia as you have formed the intention to make your home indefinitely and currently you do not have any plans to return to Australia. You are not a resident under this test. | Detailed Reasoning - The 183-day test: When a person is present in Australia for 183 days or more 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 have no plans as yet to visit Australia after your departure but may return for a weekend to finalise the sale of your house. You are not a resident under this test as you have not been in Australia for 183 days or more in any income 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. Only Commonwealth Government employees are eligible to contribute to the CSS and PSS. Neither you nor your spouse is eligible to contribute to a Commonwealth Super fund. You are not a resident under this test. | Detailed Reasoning - Your residency status: As you have not passed any of the four tests of residency, you are not considered to be a resident of Australia for tax purposes for the relevant periods.