Private ruling: Residency
Date of advice: 25 July 2017
Published: November 2017
Ruling period: Year ended 30 June 201C | Year ended 30 June 201D | Year ending 30 June 201E
Date scheme commenced: 1 July 201B

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

Relevant facts and circumstances: You are a citizen of Australia. You departed Australia on a permanent basis in 201A. You have accepted a two year employment contract in Country A. Your contract is governed by Country A’s labour laws and paid in Country A’s currency. Your employer has indicated to you that there is a strong possibility of extension of up to three years. Prior to accepting the position in Country A you lived and worked in Country B for two years. You were intending on returning to Australia at the completion of your contract in Country B. You now intend to stay in Country A indefinitely due to promising job opportunities in your field as well as meeting your partner in Country A. You have been granted a residency permit which allows you to stay in Country A until 201E. You have informed Australian Electoral Commission (AEC) that you have departed Australia. You do not have private health insurance in Australia. You do not own any property in Australia. You disposed of the majority of your possessions in Australia prior to departing but you have left some personal effects in storage with a family member. You have maintained bank accounts in Australia but these accounts are currently empty. You have opened a bank account in Country A. You contribute to a local pension fund in Country A. You have signed a long-term lease in Country A. You are not eligible to contribute to the relevant commonwealth superannuation funds.

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

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 derived 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. This includes employment income, rental income, Australian pensions and annuities and capital gains on Australian assets. 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: ● resides test ● domicile and permanent place of abode test ● 183 day test and ● Commonwealth superannuation fund 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. | Detailed Reasoning - The resides (ordinary concepts) test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3rd 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'. The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year: ● physical presence in Australia; ● nationality; ● history of residence and movements; ● habits and 'mode of life' ● frequency, regularity and duration of visits to Australia; ● purpose of visits to or absences from Australia; ● family and business ties with Australia compare to the foreign country concerned; and ● maintenance of a place of abode. The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive. Taxation Ruling IT 2650 Income Tax: Residency – permanent place of abode outside Australia , emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. Physical presence in Australia Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia , considers physical presence or length of time by itself is not determinative of residency. An individual's behaviour as reflected by a degree of continuity, routine or habit that is consistent with residing in Australia is relevant. Frequency, regularity and duration of visits to Australia Since forming the intention to reside overseas on a permanent basis, you have had infrequent short trips to Australia to visit family. These trips have not been for employment purposes and are consistent with a person residing overseas. Family and business ties with Australia Your partner resides in Country A. You do not have an employment contract with an Australian entity. You have no significant financial assets or investments in Australia. Maintenance of a place of abode You do not have a place of abode in Australia. You have sold almost all of your possessions in both Country B and Australia. You have left some personal items in storage with your Parent. You have informed the Australian Electoral Commission (AEC) that you have departed Australia. You do not have private health insurance in Australia. Based on all the facts, your behaviour is consistent with not residing in Australia and being considered a non-resident for tax purposes under the resides test. | Detailed Reasoning - The domicile test: If a person’s domicile is Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. 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. 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. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. 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 e.g., through having obtained a migration visa. A working visa for a substantial period of time such as 2 years would be sufficient evidence of an intention to acquire a new domicile of choice. You have demonstrated that your domicile would not be in Australia for the following reasons: ● You do not lease a home in Australia. ● You do not own residential property in Australia. ● You do not have any household items in Australia. You have left some personal items in storage with your Parent. ● Your Australian bank accounts are currently empty. ● You have informed the AEC that you have departed Australia. You have demonstrated that you will have a new domicile by choice in Country A for the following reasons: ● Your partner also resides in County A ● Your place of employment is in Country A. ● You have signed a lease in Country A. ● You contribute to a pension fund in Country A. ● You have purchased a bicycle for transportation and other household effects in Country A. | 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 does not intend to take up residence in Australia. As discussed above, your intention is to reside in Country A and that will be your usual place of abode. The Commissioner is satisfied that you do not meet the 183 days test as you intend to stay in Country A indefinitely. You would not be a resident of Australia under this test. | Detailed Reasoning - The superannuation test: Under section 6(1) of the ITAA 1936, an individual is still considered to be a resident if that person is: a) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or b) an eligible employee for the purposes of the Superannuation Act 1976; or c) the spouse, or a child under 16, of a person covered by (a) or (b). You are not eligible to contribute to the relevant Commonwealth superannuation funds. You would not be treated as a resident under this test. | Detailed Reasoning - Your residency status: As you would not satisfy any of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not a resident of Australia for income tax purposes.