Edited version of private ruling

Authorisation Number: 1011495008488

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Ruling

Subject: Residency - Leaving Australia

Questions and answers:

Are you a resident of Australia for tax purposes?

Yes.

This ruling applies for the following period:

Year ending 30 June 2013

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are a citizen of Australia.

You have lived in Australia since you were a child.

You expect to depart Australia to work abroad.

Overseas, you will have a X year working visa.

The purpose of your stay in overseas is to take up employment.

You do not intend to stay overseas permanently, you wish to fulfil your contract and maintain your period of stay to roughly X years.

During periods of leave you intend to return to Australia which are granted you by your overseas employer. You are unsure how often you will be able to return because of scheduling, weekly rostering, leave availability and the cost/availability of tickets. You wife will alternately visit you overseas.

The majority of your time will be spent overseas. You will reside there for more than 183 days in a year.

You will rent an apartment overseas under your name. Your accommodation will not be provided by your employer.

Upon arrival overseas, you will purchase household furnishings and establish a bank account for your day-to-day living.

Your assets in Australia include rental properties and bank account savings.

Overseas you have a year renewable contract. At this time, you intend to stay overseas for the full term of your X year immigration visa.

You will be paying income tax on your overseas salary and wages to relevant the tax authority.

You will relocate to overseas by yourself. At a later date, your spouse will try to join you. Your spouse is unable to move immediately.

Your tax records show that you indicated that you were not an Australian resident for tax purposes in previous years.

You have previously lived overseas and have friends there. When you arrive you will make contact with your friends..

You advised that you returned to Australia from your previous stay as the rising cost of living overseas was making life difficult.

Your spouse and you have never been employees of the Commonwealth Government of Australia.

You will not be making contributions to an Australian superannuation fund whilst you are overseas.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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: 

1. the resides test,

2. the domicile test,

3. the 183 day test, and

4. the superannuation test.

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. 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

- whether the person is physically present in that country at some time during the year of income

- the history of the person's residence and movements

- if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

- if the person is outside the country for part of the relevant income year, the purpose of the absences

- the family and business ties which the person has with the particular country, and

- whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

In your case your intended length of stay overseas is X years. Your initial contract length of stay is for a period, though you intend to renew your contract until your visa expires in X years.

You have a history of residing outside of Australia, your tax records indicate non-residence from 1 July 200X to 30 July 200Y and a mailing address overseas. You advised that you returned to Australia as the rising cost of living in overseas was making life difficult.

On the upcoming trip, your spouse will remain in Australia but hopes to join you in the future. You intend to visit your spouse in Australia depending on leave availability and airline ticket availability; vice-versa, your spouse will in the interim make trips overseas to spend time with you.

You intend to remain overseas because the airline that you will work for is based overseas. You will travel to other countries on a near daily basis.

Your purpose of absence from Australia is to pursue employment in overseas.

You will not abandon your dwelling in Australia, you will also maintain your Australian investment properties whilst overseas and continue to keep an Australian savings account.

You will maintain a place of abode overseas. You are now in the process of finding an apartment for living overseas. You will pay for the apartment and therefore establish a dwelling overseas.

On the weight of the facts you have provided, you there is no indication that you will dwell permanently overseas. You have not expressed the intent to dwell permanently overseas. You will return to your usual abode in Australia when adequate leave is available, and return airline tickets are available.

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.

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.

You are an Australian citizen and therefore maintain a legal tie to Australia. As you have predominantly resided in Australia for much of your adult life, your domicile or the place by which you view as home is in Australia.

Permanent place of abode

It is clear from 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 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."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

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:

- the intended and actual length of the taxpayer's stay in the overseas country;

- 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;

- 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;

- whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

- the duration and continuity of the taxpayer's presence in the overseas country; and

- 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.

Your intended length of stay is a finite period. You have indicated that X years is the extent of your stay.

Your intent to remain overseas is to pursue employment.

You will have established a temporary residence Your spouse will remain in Australia living apart from you.

You will not abandon your place of residence in Australia during your period of overseas absence. Your place of residence in Australia will be occupied by your spouse.

The duration of your stay will not be continuous as you will be spending periods of extended downtime in Australia.

You maintain a durable association with Australia in respect to family, your investments, your retirement income and residential ownership.

On the weight of fact you have provided, your apartment overseas will be considered a transitory or temporary place of abode used solely as accommodation for employment purposes. You will remain overseas for as long as necessary. Your home which you established over many years remains in Australia. To this end, the facts provided do not support the view that you have abandoned your domicile of choice in Australia.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.

In your case you will be a resident of Australia for tax purposes in the years that you are in Australia for more than 183 days in the income year as you do not have a permanent place of abode outside of Australia.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:

- established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or

- established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or

- the spouse or child under 16 of a person covered by either of the above funds.

In your case, you have never been a Commonwealth government employee and therefore you are not able to contribute to the abovementioned superannuation schemes.

Your residency status

As you meet the resides test and the domicile test, you are a resident of Australia for tax purposes.

As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia and will therefore include the income you receive overseas.

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