Private ruling: Residency
Published: March 2015
Ruling period: 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 2014

Ruling: Questions and answers | 1. Are you a resident of Australia for tax purposes? | No. | 2. Is the income you gain from foreign sources assessable in Australia? | No.

Relevant facts and circumstances: You were born in Australia and are an Australian citizen. You have relocated to Country X to work with a foreign company and you intend to work with this employer indefinitely. You took this action due to uncertainty with ongoing employment and career progression with your Australian employer. Your employment contract is for an initial period of 12 months; however, your employer has indicated that the chances of an extension are high. If an extension is not possible, you intend to take up a contract with another overseas employer in your field of work. You currently have active applications with two other companies as a backup. You intend to work with your foreign employer until you retire. You are on leave without pay with your Australian employer; however, you do not intend to return to this employer because of poor career prospects. If you are offered a redundancy you will take it. Your spouse relocated to Country X with you. Your spouse resigned from their Australian employment as part of your relocation. You have a Country X residence visa current for 12 months. If your employment contract is extended as you hope, an extended residency visa will be arranged. You will return to Australia for a maximum of five to seven days during your first year of employment. You are currently renting a property in Country X via a private lease and you intend to purchase land and build your own residence. Your employer does not provide you with accommodation. You have purchased a vehicle and household goods in Country X and have transported sporting gear and personal effects to Country X. The Australian property you formerly lived in is being rented out and you no longer have a place to live in Australia. You have a mortgage on the property and intend to sell the property. You have another property in Australia which is rented out and you have a mortgage on this property. You have bank accounts in Australia to service this mortgage and the mortgage on your former residence. You will forward funds to Australia to assist with mortgage payments as required. You have given away and sold a considerable number of your Australian household items and have rented your former residence partly furnished. You have adult children in Australia who are pursuing their own careers. In Country X, you have joined a local swimming group and surfing group. You do not have any social or sporting connections with Australia. Neither you nor your spouse is employed by the Australian Commonwealth government.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5

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 gained 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'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and all the circumstances of the taxpayer are taken into account in arriving at a decision. In your case, there are various factors that indicate that you are no longer residing in Australia. Specifically: • you relocated to Country X for work purposes; • your spouse relocated to Country X with you; • you intend to live and work in Country X indefinitely; • you have established your own rental accommodation in Country X and intend to build a home there in the future; and • your Australian residence is no longer available for you to stay in as it has been rented out. Based on the information provided, it is considered that you were no longer residing in Australia from when you relocated to Country X. Therefore, you are not a resident of Australia under this 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. | 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. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. In your case, your domicile of origin is Australia and at this time you have not demonstrated in a legal sense that you have established a new domicile in Country X. Therefore, your domicile is still Australia. | Detailed Reasoning - Permanent place of abode: 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. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." In your case, there are various factors that indicate that you have established a permanent place of abode outside of Australia. Specifically: • you relocated to Country X for work purposes; • your spouse relocated to Country X with you; • you intend to live and work in Country X indefinitely; • you have established your own rental accommodation in Country X and intend to build a home there in the future; and • your Australian residence is no longer available for you to stay in as it has been rented out. Based on the information provided, the Commissioner is satisfied that your permanent place of abode is outside of Australia. Therefore, you are not a resident of Australia under this test from when you relocated to Country X. | 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. You will not be a resident under this test as you will not spend more than 183 days in Australia in an income year while you are based overseas. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse currently contribute to certain superannuation funds for Commonwealth government employees. You are not a resident under this test as neither you nor your spouse is employed by the Australian Commonwealth government. | Summary: You do not meet any of the tests of residency and ceased to be a resident of Australia for tax purposes from when you relocated to Country X. As you are not a resident of Australia, your assessable income from the above date only includes income gained from sources in Australia. As a resident for only part of the relevant income tax year, your Australian source income for the year will be taxed entirely at resident rates and the tax-free threshold will be apportioned based on the number of months in the income year that you were a resident.