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: Question and answer: | Will you be a resident of Australia for income tax purposes from the date you leave Australia to move overseas? | No.

Relevant facts and circumstances: Your country of origin is Australia and you are an Australian citizen. You are single with no dependants. You have accepted an employment contract with a country X company and will be relocating to country X soon. You will be working on a long term project in country X. You will be renting or will purchase an apartment and live and work in country X for an indefinite period of time. You have been granted a visa which is sponsored by your employer. The visa is renewable every two years. You may visit Australia for short family visits less than once a year for two weeks at a time. Prior to departing Australia, you will be selling your belongings except for personal items you will take with you. You will sell some shares you own prior to departing. You will keep your Australian bank accounts and advise the bank of your overseas address. You are in the process of removing your name from the electoral roll and cancelling private health insurance and advising Medicare of your departure from Australia. You have never been a member of the CSS or PSS.

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

Reasons for decision: Summary: Generally 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 within the tax provisions and provides four tests to ascertain the residency status. These tests are: • the resides test, • the domicile test, • the 183 day test, and • the Commonwealth superannuation fund test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. 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 not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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 with Australia compared to the foreign country concerned, and (viii) maintenance of a place of abode. You will be living and working in country X and intend to be there for an indefinite period of time. For the reasons you provided, you will not be residing in Australia according to the ordinary meaning of the word and will not meet 'the resides' test from when you leave Australia. | Detailed Reasoning - Other residency tests: Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund 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: Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your country of origin is Australia and you are an Australian citizen. Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia. | Detailed Reasoning - Permanent place of abode: 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 (paragraph 14 of IT 2650). 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode; i. the intended and actual length of the taxpayer's stay in the overseas country; ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances. In your case, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia for the following reasons: • you have accepted an employment contract to work on a long term project in country X • you intend to stay living and working in country X for an indefinite period of time • you will establish private rental accommodation in country X or purchase an apartment • you will only return to Australia for short holiday visits less than once a year • you will inform relevant Australian authorities such as Electoral Office, banks and Medicare that you are leaving Australia permanently. As the Commissioner is satisfied that you have a permanent place of abode outside Australia, you are not a resident of Australia for income tax purposes under this test. | Detailed Reasoning - 3. The 183-day test: Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that your usual place of abode is outside Australia and you have no intention to take up residence here. You will not be present in Australia for more than 183 days in the relevant years. Thus, you are not a resident under this test. | Detailed Reasoning - 4. The superannuation test: You will be a resident if you are eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or you are the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. You have never been a member of a relevant superannuation scheme and not an eligible employee for the purposes of the Superannuation Act 1976 . Therefore, this test does not apply to you. | Detailed Reasoning - Your residency status: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not an Australia resident for income tax purposes. | Detailed Reasoning - Part year tax free threshold: Where a taxpayer either becomes a resident or ceases to be a resident of Australia during a year of income, the period of part-year residency for calculating the pro-rating of the tax-free threshold is determined under section 18 of the Income Tax Rates Act 1986 (Rates Act). When completing your tax return for the year ended 30 June 2015 you will enter your departure date out of Australia which will ensure your tax free threshold will be pro-rated according to your departure date out of Australia.

Does Part IVA apply to this ruling?: The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the MEI low risk PART IVA list as specified in ORCLA.