Private ruling: Residency Status
Date of advice: 7 January 2019
Published: April 2019
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 January 2019

Ruling: Q1: Are you a non-resident of Australia for tax purposes for the period you live overseas? | A1: No

Relevant facts and circumstances: You are a citizen of Australia. You have not been granted permanent residency in any other country. You will depart Australia. Over the 20XX/20XXfinancial year will have been in Australia for greater than 183 days. Your employment contract is with a company as an Adviser is for a period of one year only, renewable upon mutual agreement. Your employer obtained a visa which will allow you to work in the relevant country for a two year period. Your contract provides a housing allowance unless the company provides housing. You will be in receipt of a transportation allowance, unless the company provides transportation for travel between your residence and work. You contract allows employees to be eligible for three economy class round trip air tickets annually to the point of origin. Medical cover is as per company insurance policy You are entitled paid leave each year. Your first ninety days of employment will be a probationary period during which the employment contract may be terminated by both parties without notice. You intend to inform the Australian Electoral Commission and Medicare that you are departing Australia. You intend to advise your private health insurance provider to have your policy suspended or cancelled. You intend to lodge Australian income tax returns as a non-resident for Australian tax purposes, reporting any Australian sourced income received. You are expecting to live in an apartment rented for an initial period for one year. You own your home in Australia and are currently servicing the loan. You own an investment property and are currently servicing the loan; this property has been placed on the market. Your spouse and two children will remain in Australia during your contract overseas. You and your spouse want your children to remain in their respective local schools. You will remit monies from your overseas bank account to an Australian bank account to assist with your family’s day to day expenses. Your mail relating to your overseas matters will be sent to your overseas address. Where there is mail relating to joint assets with the family, your mail will be sent to your Australian home address but redirected to the overseas address accordingly. You will be relocating a minimal number of furniture items overseas. You will be taking all your personal effects. You will receive income from shares and dividends and your investment property. You will inform the relevant Australian financial institutions that you will be a non-resident prior to you departure. Where required you will lodge a foreign return in another country you will as a resident of the relevant country. You will suspend/cancel all connections in Australia and participate in the relevant countries sporting/social activities. You will suspend all Australian professional or occupational memberships and establish memberships to local professional organisations. You will resign from you role in Australia.

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

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 gained 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. 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 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: ● 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 to different countries ● 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 . 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. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - Physical presence in Australia: 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. You are a citizen of Australia. You will be in another country for work purposes. Your spouse and children intend to remain in Australia whilst you are working in the relevant country. You maintain assets within Australia. Based on the facts above you were residing in Australia according to the ordinary concepts for the 20XX/20XX financial year. In the recent case of Iyengar v FCT 2011 ATC 10-222 , the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. In your case you are moving to another country for work purposes and will be continuing to meet your mortgage. Your spouse and children will remain in Australia. Your spouse and children don’t intend to live with you overseas so that they can continue their schooling with little disruption. Your connection with Australia has not been broken because you are working overseas and you intend on making trips back to Australia to visit with your immediate family. To also support this, your employer provides you with leave provisions and economy airfares to return to Australia throughout your employment. In your case you choose to work outside of Australia in another country, which is your reason for being overseas and you therefore remain a resident of Australia for taxation purposes. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the ‘domicile and permanent place of abode’ test as an alternative argument. | Detailed Reasoning - The domicile test: If a person’s domicile is Australia they will be 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. Your domicile of origin is Australia. 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. The Commissioner is not satisfied that you set up a permanent place of abode outside Australia for the following reasons: ● Your spouse and children have not accompanied you to the relevant country. ● Your children are enrolled in school in Australia ● You shall be provided with housing allowance unless the company provides you with housing. You are a resident under this test. | Detailed Reasoning - The 183-day test: Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that: ● their usual place of abode is outside Australia ● they have no intention to take up residence in Australia The term ‘usual place of abode’ is not the same as ‘permanent place of abode’. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country. In your case, in the 20XX-20XX year you have spent more than 183 days in Australia. You have also indicated your intention to return to Australia whilst employed overseas to visit your immediate family up to three times a year. As your usual place of abode is in Australia, your family connections are in Australia and that you were present in Australia for more than 183 days during the 20XX-20XX financial year and that your usual place of abode is in Australia you will be a resident of Australia under this test. For the other income years, you are not a resident of Australia for tax purposes under this test as it appears that you won’t be present in Australia for 183 days. | Detailed Reasoning - Your residency status: You will be a resident of Australia for taxation purposes for the period you are working in the relevant country. As a resident of Australia for taxation purposes you are required to declare all you income both in Australia and outside Australia. Your foreign source income is assessable in Australia and is required to be declared in your Australia tax returns.