Private ruling: International – residency
Date of advice: 4 June 2018
Published: August 2018
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20YY | Year ended 30 June 20ZZ
Date scheme commenced: Winter 20AA

Ruling: Q1: Did you cease to be a resident of Australia for income tax purposes after Spring 20XX? | A1: Yes

Relevant facts and circumstances: You ceased full-time employment and departed Australia in Winter 20AA intending to migrate to Country A. In Spring 20AA your family also left Australia to join you. You and your family all hold Country A residence visas. Your visa is valid as long as you retain employment in that country. You plan to make your home outside Australian permanently with your family. You advised Medicare that you had departed and have no private health insurance which needs such advice. You have advised your Australian bank that you have departed so withholding tax can be deducted from your bank accounts. You have not retained professional, social or sporting connections with Australia. When next you lodge an Australian tax return you will lodge as a non-resident. When you arrived in Country A you stayed at a commercial apartment complex before leasing your own apartment for 12 months. You retain a property in Australia which is leased on normal commercial terms and is managed by local real estate agents on your behalf. You intend to sell this property when market conditions are suitable. You have shipped all of your family belongings to Country A and have purchased a vehicle locally. You are employed on an open ended contract which has indefinite terms of service. You have never been an employee of the Commonwealth Government and hence are not a member of any government superannuation scheme.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | 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 - Resides 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. The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year: ● 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 with Australia compared to the foreign country concerned; and ● Maintenance of a 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. In Landy v FC of T 2016 ATC 10-435 ;[2016] AATA 754, the taxpayer took on a supervisory role at an oilfield in Oman that lasted 21 months. On or before departure, he cancelled his Medicare, notified his private health insurance fund, requested his name be removed from the electoral roll and completed an outgoing passenger card indicating that he was leaving Australia permanently. However, throughout his employment in Oman he financially supported his wife in Australia, garaged his two motor vehicles at her home, maintained a joint bank account with his wife, maintained his offices as director and secretary of an Australian company (his wife being the other director and shareholder) and resumed living with his wife on his return. The AAT found that the taxpayer's lack of severance of connections with Australia, and the lack of establishment of enduring and lasting living ties with Oman, required a conclusion that the taxpayer had not ceased to be a resident of Australia as ordinarily understood. In your case, you are a citizen of Australia who departed Australia with the intention of residing overseas permanently. You have not returned to Australian since departing. Your family remained in Australia and departed a few months later to join you in your newly established abode. You are not a resident for tax purposes under the resides test after your families departure. Before this date you are considered to have maintained an enduring association with Australia as you had an abode in Australia which continued to be occupied by your family. | Detailed Reasoning - The domicile test: Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: “Domicile” is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person’s domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice. In your case, you are a citizen of Australia. You have left Australia and have chosen to live in Country A. You have not abandoned your domicile in Australia and acquired a domicile of choice in the Country A as you do not yet have the right to reside permanently in that country. This is because you have not, as yet, been issued a visa that will allow you or to remain there indefinitely. | Detailed Reasoning - Permanent place of abode: A person’s ‘permanent place of abode’ is a question of fact to be determined in the light of all the circumstances of each case. ( Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 ( Applegate )) In Applegate , the court found that ‘permanent’ does not mean everlasting or forever but it is to be contrasted with temporary or transitory. The courts have considered ‘place of abode’ to refer to a person’s residence, where he lives with his family and sleeps at night. Taxation Ruling IT 2650 Income Tax: Residency – Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual’s permanent place of abode. These factors include: (a) the intended and actual length of the individual’s stay in the overseas country; (b) any intention either to return to Australia at some definite point in time or to travel to another country; (c) the intended and actual length of the individual’s stay in the overseas country; (d) any intention either to return to Australia at some definite point in time or to travel to another country; (e) the establishment of a home outside Australia; (f) the abandonment of any residence or place of abode the individual may have had in Australia; (g) the duration and continuity of the individual’s presence in the overseas country; and (h) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer’s children, family ties. Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors. Based on all the facts, the Commissioner is satisfied you have established a permanent place of abode outside Australia, in Country A. Therefore you are not a resident for tax purposes under this test from the date your family left Australia. | Detailed Reasoning - The 183 days 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. In your circumstances you have not travelled to Australia since you departed. Accordingly, you are not a resident for tax purposes under this test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector 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 contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You are not a resident for tax purposes under this test. | Detailed Reasoning - Residency status: As you do not satisfy any of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a non-resident of Australia for income tax purposes from the date your family departed Australia.