Private ruling: Residency
Published: December 2013
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you a resident of Australia for taxation purposes from a date? | No.

Relevant facts and circumstances: You were born in Australia and are an Australian Citizen. Your spouse was born in foreign country X and is a citizen of that country. Your spouse is now permanent resident of Australia. You are moving to foreign country Y on a date because you have obtained employment there. You will be staying in foreign country Y for a minimum period of approximately two years and your spouse will accompany you for the full duration. You have a working visa until a later date obtained through your employer. It allows you to live and work until a later date. It also allows any dependents to work and live there. You and your spouse are intending to stay in foreign country Y until a later date and then migrate to foreign country X for another couple of years. Your spouse has family there. You are expecting a child. You formed the intention to make your home indefinitely outside Australia over the last year. You and your spouse have been discussing the move overseas due to your current employment. You are expecting your child and believe raising it in a different country would be a great experience for him or her and would allow you to be closer to your family in case there are any issues. Your company has been finalising your new contract for the last six months and from there you and your spouse have been making all the changes required to leave the country. You do not have plans as yet to return to Australia. Your spouse is very close to their family in foreign country X so you are looking forward to spending time with them after your time in foreign country Y. Also, with his/her career the job opportunities are much better in foreign country X compared to Australia. You do not have a return airline ticket. You will return to Australia for approximately one week for a social occasion. You will visit your family. After this date you have no plans to return to Australia. Your employer company provides you an extra monthly income to use for rental purposes. You and your spouse are looking at properties and have already possibly found a house. At this stage you and your spouse are definitely opening up a saving account overseas and getting a credit card. You are also looking into purchasing a car. You are saving to purchase another house in foreign country X. You and your spouse own a house in Australia. While you are overseas, this will be rented as an investment property. You may later decide to sell it. During your time overseas you and your spouse will live in rented accommodation. All your and your spouse's household effects will be loaded into a container and sent to your address in foreign country Y. You currently own a car but are trying to sell it before you leave. You may later decide to sell it. You have a simple every day account with a bank to help the tenant transfer rent payments, make payments on your home loan and transfer funds if the house needs repairs. You also have a credit card which can be used internationally and will help you settle into your new life in foreign country Y until you find another provider. The only Australian income you will be receiving is from a rental property. Your employer in foreign country Y is a company. Your employment with them can be extended. You have been very happy with this employer and you and your spouse are both open to staying in foreign country Y longer if the opportunity is right. You have supplied a copy of your employment contract. You do not have a position or job being held for you in Australia. You have no social or sporting connections in Australia. In foreign country Y, your spouse will be part of a social group. This group aids the community where ever possible. At this stage you have no sporting contact in foreign country Y. Neither you nor your spouse has ever been a Commonwealth Government of Australia employee for superannuation purposes. You are not eligible to contribute to a Commonwealth super fund. You have advised the Australian Electoral Office to have your name removed from the electoral role. Your spouse has never been on the electoral roll. You and your spouse have informed your account and bank manager of your status as non-residents. Neither you nor your spouse has any investments with Australian companies. You will be advising Medicare to have your name removed from their records. When completing the Australian Immigration Outgoing passenger card you will state as your reason for going overseas will be departing permanently. You are over 16 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 (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 test · the 183 day test · the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three 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: · 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 . 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 relation to this the AAT has stated that: 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 moving to foreign country Y on a date because you have obtained employment there. You will return to Australia for a short visit for a social occasion and to visit family. After this date you do not have plans to come back. | Detailed Reasoning - Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. You were born Australia and you are a citizen of Australia. | Detailed Reasoning - Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. You are moving to foreign country Y on a date because you have obtained employment there. You will be living in rented accommodation. You and your spouse are looking at properties and have already possibly found a house. All your household effects will be loaded into a container and sent to your address. Your spouse will join a social group. You and your spouse are intending to stay in country Y and then migrate to foreign country X for a couple of years. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during period of two years and seven months to be residing in Australia. You will return to Australia for a short visit for a social occasion. You will also visit your family. After this date you do not have plans to come back. | Detailed Reasoning - Purpose of visits to or absences from Australia: You will move to country Y to live and work from a date. You will return to Australia for a short visit for a social occasion and to visit your family. | Detailed Reasoning - Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: You have family in Australia. Your spouse has family in foreign country X. You and your spouse will remain together while you are overseas. Your child will be born overseas. | Detailed Reasoning - Business ties: Your business ties will be with your employer in foreign country Y. You have no position or job being held for you in Australia. | Detailed Reasoning - Maintenance of Place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You and your spouse own a house in Australia which you will rent while you are overseas but which you may later decide to sell. | Detailed Reasoning - Summary - the resides test: As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances. There are several factors outlined above which indicate that you will have ceased to be a resident of Australia. Specifically, you: · will be living and working in foreign country Y from a date · will be staying in foreign country Y for a minimum period · may have your employment contract extended · will be accompanied by your spouse · are intending to stay in foreign country Y until a later date and then migrate to foreign country X for several years · will rent the house you own in Australia but may decide to sell it later · will have your household effects sent to your address in foreign country Y · do not have plans to return to Australia · do not have a return airline ticket · do not have a position or job in being held for you in Australia · have no social connections in Australia apart from your family · have no sporting connections in Australia · you have advised the Australian Electoral Office and your bank, and will advise Medicare of your impending status as a non-resident Based on a consideration of all of the factors outlined above, you will not be a resident of Australia according to ordinary concepts under the resides test as you will not maintain a continuity of association with Australia for the relevant period. | 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. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. In your case, as you are still an Australian citizen while living in the foreign countries, your domicile is Australia and remains unchanged. 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. In your case, you: · will be renting a property in foreign country Y to live in with your spouse (and child) · will have your household effects sent to your address in foreign country Y Based on the above, the Commissioner is satisfied that you will establish a permanent place of abode outside of Australia. Therefore, you are not a resident under the domicile test. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You will return to Australia for a short visit for a social occasion. You will visit your family. After this date you have no plan to return to Australia. You have not been present in Australia (after a date) for a total period of more than half of the year of income. Therefore you are not a resident of Australia under the 183-day test. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. Neither you nor your spouse has ever been a Commonwealth Government of Australia employee for superannuation purposes. You are not eligible to contribute to a Commonwealth super fund. You are are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test. | Detailed Reasoning - Conclusion: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes during the period.