Private ruling: Residency status
Date of advice: 20 July 2016
Published: August 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2015

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

Relevant facts and circumstances: You are an Australian citizen and you resided in Australia prior to moving to the overseas country. You are divorced and have one non-dependent child. You are employed in the overseas country and are paid in Australian dollars into your Australian bank account. You do not travel to Australia for work purposes. Your focus has and will remain at the site of your employment in the overseas country. You had an initial 18 month employment contract which was then extended by six months. It was extended again when you signed a further two year contract extension. Your intention is to extend the contract further as the next opportunity arises. You advise that from the date you signed the two year contract it can be substantiated that your intention was to reside overseas indefinitely. Your employer chose to retain you on business trip visas that are renewed on a monthly basis. You are currently working with your employer to obtain a long term visa, however your employer has a limited number of long term visas available to them and these are allocated to those with dependant spouses and children first. If a long term visa was to become available they will work with you to allocate that type of visa to you. You had no option of requesting superannuation contributions to be made to overseas pension funds and therefore were subject to the agreement and arrangement with your employer. Due to the type of visa you are on you are unable to open a bank account in the overseas country. You continue to use your Australian bank account. Since you signed the two year contract you have returned to Australia once for a short period of time on holiday. Your stay was in hotels and with family. Following trips overseas you have always returned to your residence in the overseas country. You own a property in Australia that is being rented. You did not return to the property on your visit to Australia. Your personal belongings have been either shipped to the overseas country or retained in a storage unit. You reside close to your worksite. You have resided in the complex since moving to the overseas country and you will continue to reside there indefinitely. The property is solely for your use. Upon departing Australia you sold your personal motor vehicle. You cancelled any mail you received at your Australian address. You have deregistered from the Australian electoral roll. You cancelled your Australian private health insurance following your departure from Australia. Your private health insurance is with an international health insurance plan provided to you by the company. The health insurance provides you with international cover. You have a company vehicle allocated to you and the overseas country driver's licence. You have not been present in Australia for more than 183 days during the 2014, 2015 and 2016 financial years. You will not be present in Australia for more than 183 days in the foreseeable future. You are not a contributing member of the superannuation scheme established under the Superannuation Act 1990, or an 'eligible employee' for the purposes of the Superannuation Act 1976 .

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 995-1

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. Section 995-1 of the ITAA 1997 defines an Australian resident for tax 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. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. Relevant to your situation are the first two tests which are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia . In examining these tests, IT 2650 provides a number of factors which assist in assessing a taxpayer's situation against the tests. A copy of this ruling is available from www.ato.gov.au . | 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 question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. The totality of the taxpayer's factual circumstances needs to be taken into account in arriving at a decision. You have gone overseas for work purposes, you have been overseas for a period of time and you intend to be overseas for a further period of time. Since your arrival in the overseas country you have lived close to your worksite. You have spent the majority of your time in the overseas country. Based on the facts above you will not be residing in Australia according to ordinary concepts. | Detailed Reasoning - Domicile: 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. Generally speaking, persons leaving Australia would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile by choice or by operation of law. 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. In this regard paragraph 21 of IT 2650 states that: 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. In your case, your domicile is Australia. There is no evidence to show that you have taken any steps to change your domicile to any other country. | Detailed Reasoning - Permanent place of abode: The Commissioner's view on what constitutes a permanent place of abode is contained in Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia. Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) 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; (c) 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; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayer's presence in the overseas country; and (f) the 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. In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. Paragraphs 13 and 14 of IT 2650 discuss the FCT v Applegate (79 ATC 4307; (1979) 9 ATR 899) case. The Federal Court rejected the Commissioner's argument that a permanent place of abode outside Australia required an intention to live outside Australia indefinitely without any intention of returning to live in Australia, other than at some remote, albeit specific point in time. 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 their 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 courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." 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. The Commissioner is satisfied that you had a permanent place of abode outside Australia for the following reasons: • You have lived in the same place in the overseas country since your departure and you intend to reside there indefinitely • You resided in the overseas country from your departure and from the day of signing the two year contract extension you intend to continue to reside there for a further period of time • You do not have a spouse or dependent children • You have international health insurance • You have not opened an overseas bank account as your visa type restricts you from doing so • You informed the Australian electoral roll that you no longer needed to be registered • Since signing the two year contract you have visited Australia once on a short holiday. You have maintained your property and bank account in Australia. The maintenance of assets in Australia was considered in Administrative Appeals Tribunal Case 4834 (1988) 89 ATC 196 (Case W13), and it was considered that whilst the applicants had retained assets in Australia, including supermarket premises, their house and furniture and some rental proceeds that in every other sense the applicants were living outside of Australia during those years and the period was long-term and indefinite. As the above circumstances support the view that your permanent place of abode is outside Australia, you are not a resident of Australia for tax purposes under the domicile test. | Detailed Reasoning - Conclusion - your residency status: From the day your intention was to reside overseas indefinitely you are not a resident of Australia for taxation purposes.