Private ruling: residency status for tax purposes
Published: September 2017
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2017

Ruling: Question and answer | Will you be a resident of Australia for taxation purposes for the period you are living and working overseas? | No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You were born in Australia. You are a citizen of Australia. You are not a permanent resident of any other country. You intend on going to Country Y to live and work for the next 5 years and up to 10 years. You will apply for an investor's visa to enter Country Y. This visa initially allows you to be in Country Y for 3 years 4 months and can be extended for a further 2 years. After you have been in Country Y for 5 years you are able to apply for indefinite leave to remain permanently in Country Y. You intend on establishing a business in Country Y. You will be a resident of Country Y for taxation purposes. Your partner will join you in Country Y. Your partner is a citizen of Country Y. You own a property in Australia which you will not rent out while you are in Country Y. The property will be used by your family as a holiday home. You will take all your belongings to Country Y. You will rent a property in Country Y and may purchase a property in Country Y. You intend on returning to Australia for 1-2 times a year and these trips will not exceed 7-10 days each. You do intend on returning to Australia to live in the future which will be in 5-10 years' time. You will have your name removed from the Australian electoral roll. Your parents and sibling will remain in Australia. You and your spouse are not eligible to contribute to the PSS or the CSS super funds. You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: Resides test Domicile and permanent place of abode test 183 day test and Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - The resides (ordinary concepts) 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. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: (i) Physical presence in Australia (ii) Nationality (iii) History of residence and movements (iv) Habits and "mode of life" (v) Frequency, regularity and duration of visits to Australia (vi) Purpose of visits to or absences from Australia (vii) Family and business ties to different countries (viii) Maintenance of place of abode. These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia 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. You intend on going to Country Y to live and work for 5-10 years. You will enter Country Y on an investor's visa. Your partner will accompany you to Country Y. You will initially rent a property in Country Y and may purchase a property in the future. You intend on starting a business in Country Y. Based on the facts above you will not be a resident of Australia for taxation purposes as you will not maintain a continuity of association with Australia. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. Your domicile is Australia. 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'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. The Commissioner is satisfied that you set up a permanent place of abode outside Australia for the following reasons: You will go to Country Y for 5-10 years Your partner will accompany you to Country Y You will rent a property in Country Y You intend on purchasing a property in the future in Country Y You intend on starting a business in Country Y You are not a resident under this test. | Detailed Reasoning - The 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 financial year for the period you are living and working in Country Y. You are not a resident 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 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. You and your spouse are not eligible to contribute to the relevant Commonwealth super fund. You are not a resident under this test. | Detailed Reasoning - Your residency status: You are not a resident of Australia for taxation purposes for the period you are living and working in Country Y.