Private ruling: Residency for tax purposes
Published: April 2014
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ending 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2011

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

Relevant facts and circumstances: You were born in, and are a citizen of, Australia. You departed Australia in 2011, prior to this you were living permanently in Australia. Prior to your departure from Australia, you lived in rental accommodation. You departed Australia with the intention of living and working in Country X. You went on a short holiday to Country Z before arriving in Country X. You entered Country X on a visa which was valid for 5 years. You renewed your visa. The visa can be renewed every five years indefinitely, with the option of applying for permanent residency after staying in Country X for five years. While in Country X you worked for Company W. You had a permanent employment position with Company W. You accepted an offer of employment with Company V in Country Y in 2013 and commenced your employment later in 2013. Your probation period ended in 2014 and you now have a permanent employment position with Company V. You have a working resident's visa in Country Y that was issued in 2013 and is conditional on your employment in Country Y. You intend to remain in Country Y for the next two to three years. After this time, you intend to return to Country X to live. You have no intention to return to Australia to live. Since your initial departure from Australia, you have returned three times for short visits, each time to spend time with your family. In 2013 you entered into a lease of a one bedroom rented apartment in Country Y for a period of one year. You intend to renew for a second year. You paid one year's rent upfront. Your employer does not provide you with accommodation. You have the following assets outside of Australia: • household effects in Country Y • bank accounts in in Country Y • bank accounts in in Country X You have the following assets in Australia: • bank accounts You sold or gave away all your household effects in Australia prior to your departure. You do not receive any income from Australian sources. You do not have children, a spouse or a partner. You have never been a Commonwealth government of Australia employee. You have advised the Australian Electoral Office to have your name removed from the electoral roll. You do not have Australian private health insurance. You have not advised Medicare to have your name removed from their records, however you have not used any Medicare since departing Australia. You lodge tax returns in Country X. You stated "Australian resident departing permanently" as the reason for going overseas when completing the Australian Immigration outgoing passenger card.

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 test, • the 183 day test, and • the superannuation 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 an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: • whether the person is physically present in that country at some time during the year of income • the history of the person's residence and movements • if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits • if the person is outside the country for part of the relevant income year, the purpose of the absences • the family and business ties which the person has with the particular country, and • whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there. 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. In your case, you departed Australia to live in Country X. You lived and worked in Country X from 2011 until 2013, when you moved to Country Y for work purposes. You intend to return to Country X permanently upon completion of your employment in Country Y, in two to three years' time. You have returned to Australia for several short trips since your initial departure. You are able to renew your Country X visa indefinitely and you are able to apply for permanent residency after five years living in Country X. You are therefore not residing in Australia according to the ordinary meaning of the word. As you are not residing in Australia, you are not a resident under the resides test. | Detailed Reasoning - The 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. Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. In your case, you were born in and are a citizen of Australia. You entered Country X on a visa which you can renew indefinitely and after five years living in Country X you will be eligible to apply for permanent residency. You intend to return to Country X permanently at the completion of your employment in Country Y, and you are able to stay in Country X permanently under your visa. You do not intend to return to Australia. Therefore, your domicile of choice is Country X. As your domicile is no longer Australia, you are not a resident under the domicile test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. In your case, you have not been, and will not be, present in Australia for more than 183 days in any income year and therefore you are not a resident under the 183 day test. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds: • established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or • established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or • the spouse or child under 16 of a person covered by either of the above funds. As you have never been a Commonwealth government of Australia employee, you are not a resident under the superannuation test. | Detailed Reasoning - Your residency status: As you do not meet any of the above tests, you are not a resident of Australia for tax purposes. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.