Private ruling: Residency
Date of advice: 26 June 2015
Published: June 2015
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 August 2013

Ruling: Question and answer | Are you a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: You are an Australian citizen. You were born in Australia. You are currently an Australian resident. You are a State Government employee and a member of a defined benefit government superannuation fund. You will resign from your current position. Your Australian superannuation income starts at this time. You will depart Australia and move to a foreign country to live and work. You will take up a position there on a (minimum) X year contract. Your employer will be an institution. The employment could be extended, normally in blocks of X years. You have supplied a copy of your contract. You will be paid in a foreign country's currency. You have not been granted permanent residency in a foreign country (or in any other country). You will have a working visa valid for some years. You intend to reside overseas for a minimum of some years and make a further decision at that time. You formed the intention when you applied for the position in a foreign country. You do not hold a return airline ticket. You do not intend to visit Australia during the period of your contract. You do not have an intention to return to Australia at a definite point in time. Although your broad intent is to retire in Australia you may never do so. You have no dependent children. Your spouse and adult children will reside in Australia while you are in a foreign country. Your spouse and a child will continue to live in your family home while your other child will live in another property you own with your spouse. Your spouse will spend some time in Australia and some time in a foreign country while remaining.an Australian resident. You will not have property in a foreign country but you may you may invest in a foreign country stock exchange. You will open a bank account there. While in a foreign country you will lease an apartment and purchase furniture and fittings for it. Your aim is to establish a long term home outside Australia. You will have your personal effects, furniture and white goods in a foreign country. In Australia your assets consist of: • personal effects • a bank account • funds in superannuation • half ownership with your spouse of a property • the family home • a recreational boat. You do not have a position or job being held for you in Australia. You have no strong sporting connections in Australia. You have no strong social or sporting connections with a foreign country. Neither you nor your spouse are or have been Commonwealth Government of Australia employees. You have not advised the Australian Electoral office because your residency status is not yet determined. You have not yet advised financial institutions of your residency status as it is yet to be determined. You do not hold any investments with Australian companies. You have not advised Medicare or your health insurance provider of your status as it is not yet determined. You will pay tax on your wage and salary income in a foreign country. You will also pay PAYG tax on your superannuation income stream in Australia. The rates of withholding tax will be determined by your residency status. You will need to lodge returns in both countries regardless of your residency status.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(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 • the superannuation test. The first X tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) . 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | 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 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. There are several factors outlined above which indicate that you have not ceased to be a resident of Australia, specifically: • you will receive superannuation from Australia • your spouse will remain in Australia living in the family home • you have assets in Australia: personal effects, a bank account, superannuation, X properties and a boat • you have not been granted permanent residency in a foreign country. Based on a consideration of all of the factors outlined above, you will remain a resident of Australia according to ordinary concepts as you will maintain a continuity of association with Australia for the relevant period. | Detailed Reasoning - The domicile and permanent place of abode 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. 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. As you will remain an Australian citizen while living in a foreign country, your domicile is Australia and remains unchanged. Permanent place of abode 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. 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. In your case, your spouse will continue to live in the family home in Australian while you are in a foreign country; though he may spend some time with you in a foreign country. You will not own a dwelling in a foreign country but you will live in rented accommodation. The Commissioner is not satisfied you will have a permanent place of abode outside of Australia. Therefore, you will remain a resident of Australia under the 'domicile and permanent place of abode' test of residency. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. You will depart Australia and move to a foreign country to live and work. You will take up a position there on a minimum X year contract. You do not intend to visit Australia during the period of your contract. You will not be present in Australia for a total period of more than half of a year of income. Therefore you will be not a resident of Australia under the 183-day test. As you have passed the resides (ordinary concepts) test and the domicile and permanent place of abode test there is no need to consider the superannuation test. | Detailed Reasoning - Your residency status: As you are a resident of Australia under two of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, it is considered that you will remain an Australian resident for taxation purposes while you are in a foreign country.