Edited version of private advice

Authorisation Number: 1012660213207

Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for tax purposes after you left Australia?

No.

This ruling applies for the following period:

Income year ended 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts:

You left Australia on X.

You emigrated to Country Y and took up residency at Z as your permanent address.

Your spouse also emigrated to country Y and resides at the same address.

On your departure, you both indicated that you would not be returning to Australia as residents.

You retain a property in Australia which is occupied by an adult child.

You have advised of your departure for voting purposes.

You have cancelled all medical fund memberships.

You retain your driver's licence; once this expires you will not renew it.

During the 2012-13 income year you returned to Australia for G days on a family visit.

During the 2013-14 income year you returned to Australia X times, for a total of H days.

Neither you nor your spouse have ever been Commonwealth Government employees.

You are over 16 years old.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1

Reasons for decision

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).

An Australian resident is taxed in Australia on income from all sources; a non-resident is only taxed in Australia on income from Australian sources.

The definition provides four tests to ascertain if an individual is a resident of Australia for income tax purposes. These tests are:

1. The resides test (residence according to ordinary concepts)

2. The domicile test

3. The 183 day test

4. The superannuation test

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 the individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for income tax purposes if they meet the conditions of one of the other three tests.

The resides (ordinary concepts) 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'.

Various court and Tribunal decisions have considered the ordinary meaning of the word 'reside' with the recent being Pillay v. Commissioner of Taxation AATA 447; Sneddon v. Commissioner of Taxation [2012] ATC 10-264; [2012] AATA 516 (Sneddon), Iyengar v. Commissioner of Taxation [2011] ATC 10-222;[2011] AATA 856 (Iyengar).

The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year:

• Physical presence in Australia;

• Nationality;

• History of residence and movements;

• Habits and 'mode of life'

• Frequency, regularity and duration of visits to Australia;

• Purpose of visits to or absences from Australia;

• Family and business ties with Australia compare to the foreign country concerned; and

• Maintenance of a place of abode.

These factors are similar to those set out in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia. Although no one single factor is decisive and the weight given to each factor depends on individual circumstances, 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.

Considering all the facts and information you have provided, you are not an Australian resident for taxation purposes according to the resides test from your date of departure.

Domicile and permanent place of abode

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982).

In this regard, paragraph 21 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (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.

Permanent place of abode

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.

In its context in the resident definition, a 'permanent' place of abode does not have the meaning of everlasting or forever. Rather, it is used in the sense of being contrasted with a temporary or transitory place of abode outside Australia. The nature and quality of use which a taxpayer makes of a particular place of abode overseas is important (FC of T v. Applegate 79 ATC 4307; (1979) 9 ATR 899).

IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode;

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

ii. 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;

iii. 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;

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

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

vi. 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.

As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances.

You have stated that you have emigrated to country Y, as such it is accepted that you have approached the country Y authorities with the intention of gaining permanent residency or a migration visa. Therefore it is considered that you have chosen country Y as your domicile of choice. If you have maintained your Australian domicile, you have demonstrated that you have a permanent place of abode in country Y. As such you are not a resident of Australia for tax purposes under the domicile test.

183 Days Test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

The period your departure to 30 June is less than 183 days, therefore, you are not a resident for tax purposes under the 183 day test.

Superannuation Test

This test only applies to persons eligible to contribute to the Superannuation fund for Commonwealth government officers or their spouses or their children under the age of 16 years.

As neither you nor your spouse has ever been employed by the Commonwealth government, you are not a resident under this test.

Your residency status

As you do not meet any of the tests you are not a resident of Australia for tax purposes from your date of departure.

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).