Private ruling: Residency
Date of advice: 21 November 2016
Published: March 2017
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 15 July 2010

Ruling: Q1: Are you an Australian resident for income tax purposes? | A1: No

Relevant facts and circumstances: You are an Australian citizen. You departed Australia in 20XX to look for work overseas after being made redundant from your Australian employer. You went to Country A in 20XX after departing Australia. You then went to Country B in 20YY. You obtained employment in Country B and are currently employed on a full-time basis. You do not require a visa to work in Country B. You have recently received a new project role on a project which is anticipated to be completed by 20aa/20bb. Since arriving in Country B in 20YY, you have lived in rental accommodation which was not provided by your employer. You have bought furniture to furnish the property. You maintain a bank account in Country B. Assets you hold in Australia include a residential property that has been rented or available for rent since departing Australia, and a bank account. Your Australian property was your primary place of residence prior to departing Australia and has been managed by a property manager since departing. Your spouse lives in Australia in rental accommodation for work purposes. Your spouse visits you in Country B every one to three months. Your spouse did not accompany you overseas as they were completing their studies, after which they obtained full time employment in Australia. Since departing Australia in 20XX, you have only returned to Australia for a total of X days in the 20ZZ income year and XX days in the 2016 income year. You are uncertain as to whether you will return to Australia on a permanent basis since taking on the new project role.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 subsection 6-5(3)

Reasons for decision: Summary: You are not an Australian resident for taxation purposes under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). | Detailed Reasoning - Detailed reasoning: 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. 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 focuses on the first two tests, being the tests most widely applicable to persons who ordinarily reside in Australia but who leave Australia temporarily and are not actually living in Australia during the year of income | Detailed Reasoning - Residence according to ordinary concepts (The resides test): 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 you do not reside in Australia according to ordinary concepts, you may still be considered a resident of Australia for tax purposes if you meet the conditions of one of the other three tests. The ordinary meaning of the word "reside", according to the Shorter Oxford English Dictionary, 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. In your case, you have been residing in Country B since 20YY and obtained permanent full-time work for a particular company. You have lived in rental accommodation since your arrival in Country B. You will be residing in Country B indefinitely. Since gaining the new project role you are uncertain as to whether you will be returning to Australia on a permanent basis. Therefore, you are not considered to be residing in Australia according to ordinary concepts and you are not an Australia resident for taxation purposes under this test. | Detailed Reasoning - The domicile and permanent place of abode 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. IT 2650 provides that where a person has an Australian domicile but is living outside of Australia, he or she will retain that domicile if they decide to return on a clearly foreseen and reasonably anticipated contingency (e.g. the end of his or her employment). 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 as per paragraph 22 and 27 of IT 2650. It does not mean an abode in which a person intends to live for the rest of their life. In your case, you are working in Country B indefinitely. Your current project's anticipated completion date is in the 20aa/bb year. However, you do not intend to return to Australia at the end of the project (i.e. your decision to return to Australia is not contingent on the cessation of the project). Even though you are an Australia citizen, your behaviour indicates your intention to make your home indefinitely in Country B. You have therefore established a permanent place of abode outside of Australia. Consequently, you are not a resident under this test. | Detailed Reasoning - The 183 day test: When a person is present in Australia for 183 days during an income year, that person may be considered a resident unless the Commissioner is satisfied that the person's usual place of abode is outside of Australia and the person does not intend to take up residence in Australia. You have not spent 183 days or more in any one income year since departing Australia in 20XX. Therefore, you are not a resident under this test. | Detailed Reasoning - The Commonwealth Superannuation Fund test: An individual is still considered to be an Australian resident if that person is a current Commonwealth government employee and is a member of the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You are not a current Commonwealth government employee, and are not a member of the PSS or the CSS. Therefore, you are not a resident under this test. | Detailed Reasoning - Your residency status: You are a non-resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936. Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income of a foreign resident includes ordinary income derived directly or indirectly form all Australian sources during the income year. Therefore, you are still required to declare any income derived in Australia in your Australian income tax return. This includes income generated from your Australian assets.