Private ruling: You are not a resident of Australia for tax purposes.
Date of advice: 22 March 2018
Published: June 2018
Ruling period: Year ended 30 June 20XX.
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you a resident of Australia for income tax purposes? | A1: No.

Relevant facts and circumstances: X was born in Australia. He is a citizen of Australia and also of country Y. His citizenship of Y was obtained in his teenage years due to his mother and father’s origin from Y. He currently holds both Y and Australian passports. He lived in Australia until moving to the other country and became a permanent resident there. He moved back to Australia about ten years ago for work purposes. He regularly returned to the other country during the following ten years. During this time, he maintained bank accounts in the other country and ownership of his properties there as he always intended to return to that country. He then permanently moved to the other country. He did not come back to Australia for any period of time during the relevant year. As of the date of the private ruling request, he has not been to Australia. He splits his time mainly between the other country and country Y overseeing business ventures. He is a director of a number of Australian companies. He is the sole director of the overseas branches of the company which are beneficially owned by an Australian Trust. The Australian division of the business continues to be run by relatives. His significant personal possessions are located in the other country. He is not married nor does he have any children. He does not have an intention of returning to reside in Australia. His Australian residence is going to be let out to an unrelated third party. He is a member of a self-managed superannuation fund in Australia. He is one of the directors of the trustee company. He made no contributions to the superannuation fund since leaving Australia. He is not a member of any Commonwealth superannuation funds. He does not own a motor vehicle in Australia. He has bank accounts in both the other country and Australia. He also has an inactive bank account in country Y. He ceased holding private health insurance in Australia after leaving Australia. He is currently in the preliminary stages of applying for citizenship in the other country.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 995-1(1) | Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision: Detailed Reasoning - Residency for tax purposes: Australian resident is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). Non-resident is simply a person who is not a resident of Australia. Residency is a question of fact and is a yearly test. The terms ‘resident’, ‘resident of Australia’ and ‘non-resident’ are defined in subsection 6(1) of the ITAA 1936. So far as an individual is concerned, a ‘resident’ or ‘resident of Australia’ is defined to mean: (a) a person, other than a company, who resides in Australia and includes a person: (i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia; (ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or (iii) who is: (A) a member of the superannuation scheme established by deed under the Superannuation Act 1990 …. Division 6 of the ITAA 1997 discusses assessable income and exempt income. Your assessable income includes ordinary income and statutory income. Section 6-5 of the ITAA 1997 refers to income according to ordinary concepts (ordinary income). If you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year. If you are not a resident of Australia you are only assessed on any income that you earn in Australia. 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. The Resides Test: In your case, you have significant business ties to Australia and have previously lived in Australia for significant periods of time. However, there are several factors that indicate that you were not residing in Australia during the 20XX-XX financial year, specifically: ● you did not visit Australia during the 20XX-XX financial year ● you permanently moved to another country to set up a branch of a business ● you have your own residence in the other country ● your significant personal possessions are in that residence ● you have taken steps to prepare your Australian residence to be rented out. Accordingly it can be said that you do not reside in Australia as a result of where you have taken up residence. The Domicile Test: You were born in Australia and your domicile of origin was Australia. You have elected the other country to be your domicile of choice as your intention is for this country to be your home indefinitely. This is evidenced by the application you are currently preparing to become a permanent resident of the other country. The Commissioner expresses his view of what is meant by permanent place of abode outside Australia in Taxation Ruling IT 2650. It examines the factors to be taken into account in determining whether a person who leaves Australia temporarily ceases to be a resident during the absence. In IT 2650 the Commissioner states that a person leaving Australia would be considered to have maintained their Australian domicile, unless it is established that they have acquired a domicile of choice in another country. Your situation is similar to that in paragraph 33 of IT 2650. In this example, a bank manager was posted overseas for two years. He expected a further posting after that time period. The bank manager left his place of residence in Australia and intended to reside outside Australia. You have established a different domicile to that of your birth. The other country is your current domicile. 183 Day Test: You did not spend any days in Australia during the period 1 July 20XX to 30 June 20XX. Accordingly, this test was not satisfied and you were not a resident of Australia for the 20XX-XX financial year. The Superannuation Test: This test did not apply as you were not a member of a Commonwealth superannuation fund. You have links to Australia in the form of being a non-resident director of multiple entities. You did not exhibit the signs of a person being a resident of Australia for the 20XX-XX financial year. You left Australia for an indefinite period. There were no family ties in the form of a wife and child in Australia. You have abandoned your Australian residence and are applying for citizenship in the other country. Based on the facts you have provided, we can conclude that you will not satisfy any of the tests of residency.