Private ruling: Residency
Date of advice: 7 November 2016
Published: March 2017
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you an Australian resident for income tax purposes until your spouse joins you in Country X? | A1: Yes | Q2: Are you an Australian resident for income tax purposes after your spouse joins you in Country X? | A2: No

Relevant facts and circumstances: You were born in Australia. You are a citizen of Australia. You moved to Country X in 20XX. You have accepted an on-going full-time position in Country X. You intend to stay in Country X indefinitely. You intend to apply for a Country X's permanent resident visa. You intend to lodge Australian income tax returns to the extent you are required to. You will maintain directorship in one company in Australia. You intend to visit Australia for approximately 10-20 days per year. You will stay at hotels or serviced accommodations when you visit Australia. You have private health insurance in Australia. Your private health insurance will not be cancelled immediately due to the coverage of your child. You intend to rent a property at your own cost in Country X. You may purchase a property in Country X. You receive director's fees from an Australian company. You will keep your Australian shares. You will maintain a bank account in Australia. You will not keep any Australian property or motor vehicles. Your current lease in Australia will be cancelled after your spouse departs Australia. You intend to either ship all your Australian furniture to Country X or sell them. Your personal effects will be shipped to Country X. You have advised all Australian financial institutions that you are a foreign resident so that non-resident withholding tax can be deducted. You have one dependent child. Your child will be at school in 20YY in Australia. Your child will start school in Country X in 20ZZ for approximately Y years. You have a spouse. Your spouse intends to move to Country X permanently. Your spouse intends to move to Country X in the 20YY financial year. Your spouse will remain living in Australia until this date. Your spouse intends to operate a business in Country X after they arrive in Country X. Your spouse intends to maintain a business in Australia while they are building a similar business in Country X. Your spouse intends to visit Australia Z times per year for family and business purposes. Each trip is going to be an average of X days. Your spouse will stay at hotels or serviced accommodations when they visit Australia. You will maintain memberships of some Australian social and sporting clubs. You have already notified the clubs that you no longer reside in Australia. Both you and your spouse are not Commonwealth Government of Australia employees for superannuation purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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 income tax 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 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 Ruing 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. In your case, you have accepted an on-going full-time position in Country X and moved to Country X in 20XX. You intend to stay in Country X indefinitely. You intend to visit Australia for approximately 10-20 days per year, and you will stay at hotels or serviced accommodations when you visit Australia. Your spouse intends to move to Country X permanently in the 20YY financial year. Your spouse will remain living in Australia until this date. The Commissioner considers that it is difficult for a taxpayer to demonstrate that they have ceased to be a resident of Australia where a place of residence remains available to them in Australia and/or where their spouse remains living in Australia. In these situations, it may be considered that the taxpayer meets the resides test as they have retained a continuity of association with Australia. Further, they may also meet the domicile test as the Commissioner may not be satisfied that they have a permanent place of abode outside Australia. In the recent case of Iyengar v FCT 2011 ATC 10-222, the AAT held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. To apply these rules in your case, we consider it significant that your spouse will not join you until a future date in the 20YY financial year. Despite their intention to move to Country X permanently, they remain living in the Australian rented property which remains available for your use before they move to Country X. Based on the facts you have provided, you are still residing in Australia according to the ordinary meaning of the word until your spouse joins you. After your spouse moves to Country X, you will not be a resident of Australia for income tax purposes. | 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. 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 order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. In your case, you were born in Australia and you are a citizen of Australia; therefore, your domicile of origin 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 not satisfied that you have a permanent place of abode outside Australia until your spouse joins you for the following reasons: ● Your spouse intends to move to Country X in the 20YY financial year. ● Your spouse will remain living in Australia with your child until this date. ● Your current lease in Australia will be cancelled after your spouse departs Australia. The Commissioner is satisfied that you have a permanent place of abode outside Australia after your spouse joins you for the following reasons: n You have accepted an on-going full-time position in Country X. n Your spouse intends to move to Country X permanently. n Your spouse intends to move to Country in the 20YY financial year. n You intend to rent a property at your own cost in Country X. Therefore, from the date your spouse arrives in Country X, 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 intend to return to Australia for approximately 10-20 days per year. You will not be in Australia for more than 183 days. 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 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 will not be treated as a resident under this test. | Detailed Reasoning - Your residency status: Based on the facts you have provided, you are a resident of Australia for income tax purposes for the period until your spouse joins you in Country X. You are not a resident of Australia for income tax purposes after your spouse joins you in Country X.