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Edited version of private ruling

Authorisation Number: 1011477016866

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Ruling

Subject: Residency - leaving Australia

Question

Are you a resident of Australia for tax purposes?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2009

Relevant facts

You are a citizen of Australia.

Australia is your country of origin.

You left Australia to take up a position in country A.

You and your spouse have been living in country A since that time.

Your spouse resigned from their job in Australia to accompany you in country A.

You rent an apartment in country A which is paid by your employer as part of your salary package.

You intended to purchase a property in country A, however country A law only allows foreigners to purchase residential properties in specially zoned areas, and where you need to live is not one of them.

The position has an initial minimum 2 year guarantee of employment followed by an open ended full-time working contract of unspecified period which your employer has re-confirmed their desire to do.

It is your intention to work under this contract indefinitely.

You currently hold a Country A temporary resident card which replaces a visa and expires in on the relevant date.

When your visa expires a further period will be issued.

You removed your name from the electoral roll in Australia some time ago.

You only intend to return to Australia for special occasions.

You have returned to Australia since leaving for various short periods.

Your assets in Country A include furniture, the contents of your apartment, a vehicle.

In Australia you and your spouse purchased a home.

Your assets in Australia also include shares, assets, and bank accounts.

You have a number of children living in Australia.

Some of your children live in your home here and they do not pay rent but are responsible for maintaining the house. These children are self-sufficient.

You do not have social or sporting connections in Australia.

In country A you are involved in a number of sporting and social clubs.

You and your spouse provide volunteer assistance and are considered contributing members of the local community.

You and your spouse were not Commonwealth Government of Australia Employees.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Residency

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 first two tests are examined in detail in Taxation Ruling 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides 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'.

You and your spouse are currently residing in country A as evidence by:

Therefore, you are not considered to be residing in Australia.

The domicile test

If a person is considered to have their domicile in 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 to prove an intention to make his or her home indefinitely in that country.

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.

In your case:

Therefore, you are not considered to have maintained your Australian domicile.

Based on these facts, the Commissioner is satisfied that you have established a permanent place of abode in country A.

The 183-day test

This test does not apply to you as it has been identified that your permanent place of abode is in country X.

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.

You will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status

As you are not considered to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident from the date of your departure from Australia under subsection 995-1(1) of the ITAA 1997.

Note

From the date you become a foreign resident any interest income will be subject to foreign resident withholding tax. As your investment income has its source in Australia, this income will be subject to tax in Australia under section 6-5(3) of the ITAA 1997. Therefore, you will need to lodge an income tax return in Australia to declare this income.

As you are considered to be a non-resident for Australian tax purposes from the day you left Australia you may be required to lodge an amended tax return for the 2008-9 income year. As you were an Australian resident for tax purposes until your Australian employment ceased, you will be eligible to a pro-rated tax-free threshold for the 2008/09 income year.

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