Private ruling: Residency and leaving Australia
Date of advice: 23 May 2016
Published: July 2016
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2014

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

Relevant facts and circumstances: You intend on living in Country X indefinitely, and you have no plans of ever returning to Australia. You have applied for permanent residency in Country X however you have to spend five years learning the language and culture of the country. You are currently undertaking language lessons as part of the abovementioned requirement. You live in privately rented accommodation in Country X. You have obtained appropriate approval, which is renewed every six months, to work and reside in Country X. You are registered with the Australian Embassy as a permanent resident of Country X. You pay income tax in Country X. You pay into a Pension Fund in Country X. You hold private health insurance in Country X. Your Australian property was sold in 20XX. You have been separated from your spouse since 20XX, and the divorce is now finalised. Your only ties with Australia are your children, who you have only visited once in the last 18 months. You have never been an employee of the Australian Government. After realising that you had a small number of Australian shares, which resulted in a small dividend in the relevant financial year, you notified the relevant Company of your overseas address, before selling the shares.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1).

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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: • the resides test, • the domicile test, • the 183 day test, and • the superannuation test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other 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. You have been living and working in Country X since 20XX and continue to do so. You intend on living in Country X on a permanent basis. Accordingly you are not residing in Australia. As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency. | 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. | Detailed Reasoning - Domicile: Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. This intention needs to be demonstrated in a legal manner by way of becoming a permanent resident or citizen of another country, for example. Your domicile is Australia because your country of origin is Australia and you are still an Australian citizen. Although you have taken steps to gain permanent residency status in Country X, this has not yet happened. Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia. | Detailed Reasoning - Permanent place of abode: 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." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; (c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayer's presence in the overseas country; and (f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. It is considered that your permanent place of abode is in Country X because: • You have lived and worked on a continuous basis in Country X since 20XX. • You intend to live in Country X permanently. • You have no intention of returning to Australia to live. • You live in private rental accommodation in Country X. • Your visits back to Australia will be minimal to visit your children. • You now consider Country X your home and have applied for permanent residency. • You have commenced Country X language testing, for the purpose of assisting you to gain permanent residency. • Your house in Australia was sold in 20XX. | Detailed Reasoning - The 183 day test: Where a person is present in Australia for 183 days 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 nodes not intend to take up residence in Australia. As you will not be present in Australia for more than one-half of the income year you will not be a resident under the 183 day test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident of Australia if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) of the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. As you do not meet the above conditions you are not a resident under this test. | Detailed Reasoning - Your residency status: You are not a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936.