Private ruling: Residency for tax purposes
Published: December 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you a resident of Australia from the time you departed Australia? | No.

Relevant facts and circumstances: You were born in Australia and are a citizen of Australia. You moved to Country X in 2014 for an indefinite period of time. You moved to Country X together with your spouse who is already a Country X citizen and your children. You have a permanent employment contract with a Country X employer. The employment contract was secured prior to your relocation to Country X. You are on a work permit visa for a term of 2 years which commenced upon your arrival in Country X. You intend to apply for a spousal residency visa which you can apply for in 2015. You and your family have purchased a home in Country X. Between your relocation in 2014 and the settlement of the new home; you are living in a rented property. You have enrolled your eldest child in various schools. You and your family have no intention or plans to return to Australia. Your property in Australia which was previously your main residence has been retained as an investment property. You have advised the State Revenue Office that this property is no longer your main residence. You have resigned as director of all private Australian companies where you held a directorship position. You are still a shareholder in three Australian companies which are inactive and act as Trustees of Australian discretionary trusts only. You have retained various investments in Australia, such as securities and real property and intend to retain such investments because of the relative strength of Australia's economy and dollar compared to the Country X currency. You have notified your superannuation fund of your relocation to Country X. You have sold the family car and cancelled the car insurance. You have advised Medicare of your family's relocation overseas and cancelled the family private health insurance. You have retained some Australian bank accounts but have notified the banks of your relocation overseas. You have requested to be removed from the Australian electoral roll. You have cancelled various Australian social memberships. Neither you, nor your spouse, have been Australian Commonwealth government employees.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 (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' and 'permanent place of abode' test • the 183 day test, and • the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - Resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd 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'. In your case, you have moved to Country X with your family to live and work for an indefinite period. Therefore, you are not residing in Australia according to the ordinary meaning of the word and you are not a resident of Australia under the resides test. | Detailed Reasoning - 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: A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982 ). In this regard, paragraph 21 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) states that: 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, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. In your case, as you have not become a permanent resident or a citizen of Country X, you have not established a new domicile of choice in that country. You were born in Australia and your domicile is still Australia. | Detailed Reasoning - Permanent place of abode: 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 (paragraph 12 of IT 2650). 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 (paragraph 14 of IT 2650). 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. In your case you have purchased a home in Country X where you intend to live indefinitely. You are planning to apply for permanent residency in Country X the near future. Therefore, the Commissioner is satisfied you have established a permanent place of abode outside of Australia and you are not a resident under the domicile test. | Detailed Reasoning - 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. You will not be in Australia for more than 183 days in any income year after your departure from Australia in June 2014 and therefore you are therefore not a resident under the 183 day test. | Detailed Reasoning - Commonwealth superannuation fund test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the 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, have never been Australian Commonwealth government employees and therefore you are not a resident under Commonwealth superannuation fund test. | Detailed Reasoning - Your residency status: As you meet do not meet any of the four tests of residency, you not a resident of Australia for tax purposes.