Private ruling: residency
Date of advice: 26 June 2015
Published: June 2015
Ruling period: Year ending 30 June 201X | Year ending 30 June 201X | Year ending 30 June 201X | Year ending 30 June 201X
Date scheme commenced: 1 June 201X

Ruling: Questions and answers | Are you an Australia resident for tax purposes? | No. | Is the pension income you receive taxable in A

Relevant facts and circumstances: You were born in Australia. You are an Australian and Country A citizen. You have provided copies of your Australian and Country A passports. You formed an intention to permanently relocate to Country A whilst on holiday there. You lived with your relative immediately prior to your departure. You departed Australia in 201X for Country A with your partner. You have left Australia permanently. You have shipped all of your personal effects to Country A. You no longer have any place of residence in Australia. Your airline ticket to Country A was one way, copy of ticket provided. You will return to Australia next year for a couple of weeks to visit family and then return to your home in Country A. You receive pension payments from Australia. You have no employment in Country A or in Australia, and the only income you receive is from your Australian pension. You hold a bank account in Australia that you use to receive some of your pension payments. You hold a bank account in the Country A that you use to receive some of your pension payments. You have registered for national insurance in Country A. You have cancelled your private health insurance in Australia. You have registered as an overseas elector with the Australian Electoral Roll.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Section 995-1 | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Section 5 | International Tax Agreements Act 1953 Schedule 1 Article 17

Reasons for decision: Detailed Reasoning - Residency for taxation purposes: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). 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. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation 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 - The 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 it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, the Commissioner accepts that you were not residing in Australia according to the ordinary meaning of the word from the time you departed Australia. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is Australia will be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice. In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin. In your case, you formed an intention to make Country A your home indefinitely when you relocated there in 201X. We consider that you made Country A your permanent place of abode on the date you departed because: • You are a Country A citizen. • You relocated to Country A with your partner. • You relocated your personal effects. • You do not have any residence in Australia. • You have set-up a bank account and registered for national insurance in Country A. Therefore, from the time you departed Australia you are a non-resident under the domicile test. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You were in Australia for more than 183 days in the 201X financial year. However, it is considered that your usual place of abode was outside Australia from the time you departed, and therefore you were a non-resident from this date. | Detailed Reasoning - Superannuation test: Based on the facts you have provided this test is not relevant in your situation as it only applies to persons eligible to contribute to the superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years. | Detailed Reasoning - Conclusion - your residency status: Based on the facts you have provided, you did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 from the time you departed Australia. Therefore, you are considered a non-resident for tax purposes from this date. | Detailed Reasoning - Taxation of your Australian pension income: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pension income is ordinary income assessable under subsection 6-5(2) of the ITAA 1997. In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country A Agreement is listed in section 5 of the Agreements Act. The Country A agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The agreement operates to avoid the double taxation of income received by residents of Australia and The United Kingdom. An Article in the Country A agreement provides that pensions (including government pensions) and annuities are taxable only by the country of which the recipient is a resident. The application of this Article extends to pensions and annuity payments made to dependants, for example, a widow, widower or children of the person in respect of whom the pension or annuity entitlement accrued where, upon that person's death, such entitlement has passed to that person's dependants. In Taxation Determination TD 93/151, the Commissioner states that as the term "pension" is not defined in any of Australia's double tax agreements, it has the meaning, for Australian purposes, it has under Australian domestic law. The Commissioner considers that its ordinary domestic law meaning, contained in the Macquarie Dictionary is: (1) a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc; or (2) an allowance or annuity. The Commissioner also refers to the view of Hill J in Tubemakers of Australia Ltd v FC of T 93 ATC 4207 that the only essential characteristic of a pension is that periodical payments are made. In your case, you receive an Australian government pension. Therefore, these payments are taxable only in the country of which you are a resident. As you are considered a resident of Country A for tax purposes from the day you departed Australia, the government pensions you receive are taxable only in Country A from that date. | Detailed Reasoning - Ruling restricted to four years: The Commissioner does not generally provide rulings for indefinite periods due to potential changes to the law in the future and also to potential changes to the facts and circumstances of the case. For this reason this ruling has been restricted to the period covered by the four financial years up to the year ended 30 June 2018. However, this does not mean that you are required to apply for a new ruling after four years. In the absence of any change to the legislation or material change to your circumstances, the interpretation of the law as explained in this ruling will continue to apply.