Edited version of private advice

Authorisation Number: 1012617539545

Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on:

1 July 2013

Relevant facts and circumstances

You are a citizen of Australia.

Your country of origin is Australia.

The purpose of your overseas trip was to marry and live with your foreign country A fiancée. You now live with your spouse and a child in foreign country A.

You first formed the intention to make your home indefinitely outside Australia when you met your then fiancée.

You do not intend returning to Australia for at least X years, if at all. You will remain overseas for the foreseeable future.

You do not hold a return airline ticket.

For foreign country A you have a spousal visa, which allows you to stay there permanently.

You also have a foreign country B residence visa. This visa allows you to stay permanently. Your employment will be in foreign country B

You do not intend applying for foreign country A citizenship. Other than to children born overseas to foreign country A parents, the government of foreign country A will not allow citizenship to people not born in foreign country A.

You have returned to Australia since first leaving Australia:

Date Movements

Date 1 You left Australia to live in foreign country A and marry your foreign country A fiancée.

Date 2 You married your foreign country A fiancée.

Date 3 You returned to Australia, having lived in foreign country A for X years and X months. You did not work in foreign country A during this period. Whilst in Australia you studied and obtained a required certified technical qualification. You worked in Australia from month A to month B.

Date 4 You returned to foreign country A permanently, having been in Australia for X months. You now live in foreign country A as a spouse.

Date 5 Your work contract commenced in foreign country B. You work X weeks on, X weeks off. Your employer flies you back to foreign country A for your two weeks off.

Date 6 Completion date of your work contract in foreign country B.

You own a house and land in foreign country A with titles in your spouse's name (as required by foreign country A law. Your legal entitlement is recognised by a foreign country A Usufruct which gives you Usufructuary rights until your death. The address is: XXXX.

Your employer has not provided you with accommodation.

The asset you hold in foreign country A is the dwelling mentioned above.

Prior to leaving Australia you lived in a suburb, but you own no real estate, land or cars in Australia.

The assets you hold in Australia are:

• Superannuation

• A share portfolio

Your Australian household effects were either gifted to family and friends or sold.

You receive no income from Australia.

You employer is XXXX. Your employment commenced on a date. The present completion date for your employment contract is a date with the possibility of extension.

Your employer pays your salary into your Australian bank account. They deduct 45% tax for the ATO.

You do not have a position or job being held for you in Australia.

You have no social or sporting connections with either Australia or foreign country A.

Neither you nor your spouse has ever been a Commonwealth Government of Australia employee for superannuation purposes.

You will advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted once your foreign residency application is approved.

You have not lodged a tax return in any foreign country as yet but you will receive a foreign country B PAYG certificate of tax paid at the end of the foreign country B financial year.

When completing the Australian Immigration Outgoing passenger card, the reason you gave for going overseas was to permanently reside overseas.

You will advise the Australian Electoral Office to have your name removed their records.

You will advise the Medicare or health insurance provider to have your name removed their records.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(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:

• the resides test

• the domicile test

• the 183 day test

• 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 (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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

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 to different countries

viii. Maintenance of a place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

(i) Physical presence in Australia

A person does not necessarily cease to be a resident because he or she is physically absent from Australia.

In relation to this the AAT has stated that:

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.

In your case you left Australia on a date, initially to marry your fiancée (which you did a date).

You formed an intention to live permanently overseas at the time you met your then fiancée.

You returned to Australia on a date and departed on a date to live permanently in foreign country A with your spouse and a child.

On a date you commenced work in foreign country B on a renewable contract, X weeks on X weeks off. When of duty you return to foreign country A.

You have visas which allow you to reside in foreign country A and foreign country B permanently.

You have/will not return to Australia for more than 183 days in an income year.

(ii) Nationality

The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case.

You were born in Australia and you are an Australian citizen.

(iii) History of residence and movements

You left Australia on a date and have lived and worked overseas since then.

You have not returned to Australia since your departure.

(iv) Habits and "mode of life"

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.

You have lived outside Australia since a date having made the intention to live and work overseas permanently.

You commenced work overseas on a date on a contract which ends on a date, with the possibility of renewal.

You own a house and land in foreign country A.

You have no social or sporting connections with either Australia or foreign country A.

You will advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted once your foreign residency application is approved.

You have not lodged a tax return in any foreign country as yet but you will receive a foreign country B PAYG certificate of tax paid at the end of the foreign country B financial year.

When completing the Australian Immigration Outgoing passenger card, the reason you gave for going overseas was to permanently reside overseas.

You will advise the Australian Electoral Office to have your name removed their records.

You will advise the Medicare or health insurance provider to have your name removed their records.

(v) Frequency, regularity and duration of visits to Australia

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during period of two years and seven months to be residing in Australia.

You have not returned to Australia since your departure.

(vi) Purpose of visits to or absences from Australia

You have live and work overseas permanently since a date.

You have not returned to Australia since your departure.

(vii) Family and business ties to Australia and the overseas country or countries

Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident.

Family

Your spouse and a child live with you in foreign country A.

Business or economic

You have been working overseas since a date.

You have a bank account in Australia.

Assets

You own a dwelling in foreign country A.

The assets you hold in Australia are:

• Superannuation

• A share portfolio.

Your Australian household effects were either gifted to family and friends or sold.

(viii) Maintenance of a place of abode

The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer.

You have not owned a dwelling in Australia.

Summary

As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you have ceased to be a resident of Australia. Specifically:

You left Australia permanently on a date to live with your foreign country A spouse and child and to work overseas.

You have a higher value of assets overseas than in Australia, specifically, the house and land you purchased in foreign country A.

You have not returned to Australia.

You will advise any Australian financial institutions that you are a foreign resident so that non-resident withholding tax can be deducted.

You will advise the Australian Electoral Office to have your name removed their records.

You will advise the Medicare or health insurance provider to have your name removed their records.

Based on the above, you have not retained a continuity of association with Australia while you have been living and working overseas and you will not be residing in Australia according to the ordinary meaning of the word.

Therefore, you are not a resident of Australia under the 'resides' test of residency.

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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Australia.

A domicile of choice is adopted when you become a citizen of a new country or apply for permanent residency in a new country.

Your domicile of choice is foreign country A as you have obtained permanent resident status and have been living and working there since a date.

You are not a resident under this test.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

You have not been present in Australia for a total period of more than half of any year of income.

Therefore you are not a resident of Australia under the 183-day test.

The superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have stated that neither you nor your spouse has ever been a Commonwealth Government of Australia employee for superannuation purposes and are you eligible to contribute to the PSS or CSS. Further, you are more than 16 years of age.

Therefore, you are not a resident of Australia under the superannuation test.

Conclusion

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

The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).