Private ruling: Residency
Date of advice: 26 July 2017
Published: November 2017
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: No

Relevant facts and circumstances: Your country of origin is country X. You are a citizen of Australia and country X. You were employed in Australia. You now work in country X. You rented accommodation in Australia with a lease agreement in place. You terminated your Australian rental accommodation and sold your household effects before you left for country X. You and your family left Australia to return to country X. You took your personal effects from Australia to country X. At the time you left Australia, your intention was to spend an indefinite time in country X. Your current employment income is paid into a country X bank account. Your Australian bank account is now closed. You cancelled your Australian private health insurance and have taken out a country X health insurance policy. You removed your name from the Australian electoral roll. You currently reside with your family in an apartment/unit owned by family in country X. Neither you nor your partner was a member of an Australian Commonwealth government superannuation scheme during the relevant period.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). The terms 'resident’ and 'resident of Australia’, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: ● the resides test ● the domicile (and permanent place of abode) test, ● the 183 day test, and ● the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 – Income tax: residency – permanent place of abode outside Australia. The latter two tests are relatively self-explanatory as they require the individual to either be physical present in Australia for a period greater than 183 days or be eligible to contribute to the PSS or CSS superannuation schemes. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. Based on the facts you have provided, we can conclude that you will not satisfy any of the tests of residency from the date you departed for country X. Accordingly you are not a resident of Australia for taxation purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936 from the day you departed for country X. | Detailed Reasoning - Further information: If your status changes from resident to non-resident before the end of an income year you should answer 'yes' to the question 'Are you an Australian resident?' on your tax return for that year. This ensures you are taxed at resident rates for that part of the tax year you were resident in Australia. Your non-residency for part of the year will be taken into account by a reduction in your tax-free threshold for that year. You will be entitled to a pro-rata tax-free threshold for the number of months you were an Australian resident during the income year. To do this, you will need to complete question A2 on your tax return 'Part-year tax-free threshold’. Non-residents of Australia do not have to pay the Medicare levy, so you can also claim the number of days that you were not an Australian resident during a tax year in your return as exempt days.