Private ruling: Residency – Leaving Australia
Date of advice: 22 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you an Australian resident for taxation purposes? | A1: No

Relevant facts and circumstances: You moved to Country X for work with an associated entity to your employer in Australia. Your employment contract states that your position in Australia will remain available to you if you return. The original employment contract was for a year and a half, and has since been extended multiple times. Your employment contract has now been extended until the 2018-19 financial year. You have a residence visa which allows you to stay in Country X for 12 months. This visa is supplied by your employer. Your spouse moved to Country X to accompany you in the 2016-17 financial year. Your independent adult children reside in Australia. Your fully furnished accommodation is rented under your employers name but you have exclusive use. You only return to Australia for vacations for no longer than 30 days in the financial year. Your Australian property was resided in by your spouse until their departure in the 2016-17 financial year. For 6 months, your Australian property was occupied by friends. Your Australian property is now vacant and is used for family vacations. You still maintain the home. Your household effects remain in your home in Australia for use by family and friends. You have acquired some household effects in Country X. Your personal effects are in Country X. You do not receive any income from Australian sources. You have no other investments in Australia, except for your superannuation funds. You have not lodged tax returns in Country X. Prior to your contract being extended, you intended to return to Australia. Your intention changed when your contract was extended to leave Australia indefinitely. If your employment contract is not extended, you will seek alternative employment in the region or elsewhere. You have not maintained or established any professional, social or sporting connections with either Australia or Country X. You have obtained a motor vehicle license in Country X. Your spouse is not employed. You informed the Australian Electoral Commission and Medicare that you have departed Australia. You advised your private health insurance provider to have your policy suspended or cancelled as you have departed Australia. Your employer provides worldwide health insurance and your policy for your child remains active until they are 25 years old. You and your spouse are not eligible to contribute to the relevant Commonwealth superannuation funds.

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 derived 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 ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3rd 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 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 compare to the foreign country concerned; and ● maintenance of a place of abode. Taxation Ruling IT 2650 Income Tax: Residency – permanent place of abode outside Australia , emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. Physical presence in Australia You are not physically present in Australia. Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia , considers physical presence or length of time by itself is not determinative of residency. An individual's behaviour is reflected by a degree of continuity, routine or habit that is consistent with residing in Australia is relevant. Frequency, regularity and duration of visits to Australia You visit Australia for vacations of no longer than 30 days in a year. Family and business ties with Australia Your spouse has accompanied you to Country X. Your adult children remain in Australia. You are employed in Country X. Your position remains available to you in Australia if you are to return. Maintenance of a place of abode Your home in Australia is vacant and maintained by you. Your employer provides you with fully furnished accommodation in Country X. The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive. Based on all the facts, you do not reside in Australia under this test. | Detailed Reasoning - The domicile test: If a person’s domicile is Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. 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. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. 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. Paragraph 23 of IT 2650 provides a list of some of the factors to be considered in deciding whether you have a permanent place of abode outside Australia. The weight given to each of the factors varies depending on the circumstances, however F.C. of T. v. Applegate (79 ATC 4307; (1979) 9 ATR 899 indicates that greater weight should be given to the following factors: ● whether the taxpayer has established a home outside Australia ● the duration and continuity of the taxpayer’s presence in the overseas country and ● the durability of association that the person has with a particular place in Australia. Although you maintained an association with Australia through your property and family, your associations with Country X are more significant for the following reasons: ● You have resided there since 2013. ● You have obtained a residence permit. ● You are employed and have a contract until 2018-19 financial year. ● Your spouse has accompanied you. ● Your employer provides you with fully furnished accommodation, of which you have exclusive use. ● You have obtained a motor vehicle license. Accordingly, you are not considered to be a resident of Australia for taxation purposes under the domicile test as you have acquired a permanent place of abode in Country X. | 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. This test does not apply as it is your intention is to reside in Country X and that will be your usual place of abode. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Generally this would include a permanent or temporary employee of the Australian Public Service (APS). You and your spouse are not eligible to contribute to the relevant Commonwealth superannuation funds. You will not be treated as a resident under this test. | Detailed Reasoning - Your 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 not a resident of Australia for income tax purposes for the year ended 30 June 2017 and future years until your circumstances change.