Edited version of private advice

Authorisation Number: 1012678756444

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

The scheme commenced on

1 July 2013

Relevant facts and circumstances

You are a citizen of Australia and your country of origin is Australia.

You and your spouse first departed Australia more than three years ago with the intention of living in Country X indefinitely.

Your Australian home was leased out by a local property agent.

For the first three years you and your spouse rented a villa in Country X and established your home there.

You and your spouse then commenced building a property where you now reside.

You and your spouse have Country X bank accounts and employ staff at your residence.

Your spouse secured full-time work and has been granted a visa that allows her/him to live and work in Country X.

Your work requires you to travel the world.

As you have not secured employment in Country X you are not eligible for a permanent visa.

You spent the majority of past few years in Country X, some of the time in Australia and other times elsewhere.

When you are in Australia it is predominantly for work purposes.

You usually spend X% of your time in Australia staying in hotel accommodation. The remaining Y% of time spent in Australia you stay predominately with your parents.

When you return to Country X you are not able to stay indefinitely and you have to depart the country in order to refresh your short term visa.

Assets owned in Country X include a villa (25 year land lease), motor vehicle, motorbike and household furniture/personal effects.

Assets are insured.

In Country X you and your spouse are members of a local club and support local sporting clubs.

Assets owned in Australia include two properties: your former residence now being rented and another where your parents have resided for many years.

You and your spouse return to Australia two to three times per year for family reasons.

All other trips made by you coincide with working arrangements.

You and your spouse are not members of any Australian superannuation funds and have requested removal from the Australian electoral roll.

You have retained existing business banking accounts for ease as these were already established and attach to loans for your Australian property and equipment.

You have not advised Australian financial institutions to deduct non-resident withholding tax, but you do not own any interest bearing accounts.

You have not lodged tax returns in any other countries.

You have maintained your private health cover in Australia as you rate this system as superior to any offered in Country X.

When you first departed Australia you completed your Australian Immigration Outgoing passenger card with 'Australian resident departing permanently' and the country of future residence supplied was Country X.

The reason stated on the departure card on subsequent visits is 'Australian resident departing temporarily'. The main reason for this is because you are aware you are still an Australian citizen and you were advised previously that you would continue to be treated as a resident for tax purposes until such time as you received a permanent Country X Visa or a request for a private ruling was granted.

Your arguments and references

You believe that whilst a majority of the facts surrounding your situation support the view that you may be a non-resident, the fact that you have not secured a visa allowing you to stay indefinitely in Country X requires the Commissioner's discretion.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6(1)

Reasons for decision

Residency

An Australian resident for taxation purposes is defined in subsection 995-1(1) of the ITAA 1997 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' are defined in subsection 6(1) of the ITAA 1936. The definition gives us a series of tests which assist in determining whether a person is a resident of Australia. These tests are:

1. residence according to ordinary concepts;

2. the domicile/permanent place of abode test;

3. the 183 day/usual place of abode test; or

4. the Commonwealth superannuation fund 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.

However, where you do not reside in Australia according to ordinary concepts, you may still be a resident of Australia for tax purposes if you meet the conditions of any one of the other three tests.

We refer to Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia which provides guidelines for determining whether individuals who leave Australia to live overseas cease to be Australian residents for income tax purposes during their overseas stay.

1. The residence according to ordinary concepts 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'.

As you will be residing outside Australia for the relevant periods, you will not be residing in Australia for the purposes of this test.

2. The domicile and permanent place of abode test

Domicile

If you have your domicile in Australia you will be an Australian resident unless the Commissioner is satisfied that you have established a permanent place of abode outside Australia.

Paragraph 8 of IT 2650 explains that you will retain your domicile of origin unless and until you acquire a domicile of choice in another country or until you acquire another domicile by operation of law.

Paragraph 21 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 prove an intention to make his or her home indefinitely in that country e.g. through having obtained a migration visa.' 

You are an Australian citizen and your country of origin is Australia. Your work requires you to travel the world. You have not secured employment in Country X and you are not eligible for a permanent visa. However, your spouse has secured full-time work and has been granted a visa to live and work in Country X.

Applying IT 2650 to your circumstances with regard to your domicile you have not sufficiently demonstrated an intention to acquire a new domicile of choice in Country X. Therefore, you have maintained your Australian domicile.

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.

IT 2650 states in paragraph 14 that 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.

Paragraph 23 points out that a person's permanent place of abode is a question of fact to be determined in the light of all the circumstances of each case. Some of these factors which have been considered relevant include:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) any intention either to return to Australia at some definite point in time or to travel to another country;

(c) the establishment of a home 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 individual's presence in the overseas country; and

(f) the durability of association that the individual has with a particular place in Australia.

Paragraph 24 of IT 2650 instructs that the weight of each factor will vary with individual circumstances and no single factor is decisive. However, 'greater weight should be given to factors (c) the establishment of a home outside Australia, (e) the duration and continuity of the individual's presence in the overseas country and (f) the durability of association that the individual has with a particular place in Australia than to the remaining factors'.

In relation to factor (a) IT 2650 states in paragraph 25 that 'a period of about two years or more would generally be regarded by [the ATO] as a substantial period…however…[this] is not conclusive and needs to be considered with all of the factors in paragraph 23 above.'

In relation to factor (c) the establishment a home outside Australia, IT 2650 states in paragraph 28 that 'the fact that an individual has established his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent'.

In relation to factor (f) durability of association with a particular place in Australia, IT 2650 states in paragraph 29 that the maintenance of bank accounts in Australia is relevant.

You left Australia to live in Country X indefinitely. Your spouse followed soon after. Your Australian residence has been leased out and is being managed by a local property agent. For the period you first arrived in Country X you and your spouse rented a villa and you commenced building a property in 2013 where you both now live.

Your home in Australia is not readily available for you as it is being rented. You do have another property in Australia where your parents have been living for some time. You do stay there with your parents on the occasions when you are in the State either on business or for visits. When you are in other parts of Australia you generally stay in hotel accommodation.

Your work requires you to travel the world. You have not secured employment in Country X and you are therefore not eligible for a permanent visa, although your spouse has secured permanent employment and has been granted a visa to live and work there.

In Mynott v FC of T 2011 ATC (Mynott) the taxpayer had left Australia and in 1998 he worked for six months in Malaysia where he met someone with whom he entered into a domestic relationship. They rented an apartment together in Manila in December 1998. The taxpayer paid for the rent, food and the schooling costs of his partner's children.

After trying unsuccessfully to obtain work in the Philippines he pursued contract work elsewhere but continued to support Ms P and her children. The taxpayer also returned to Australia several times for various periods, on each occasion staying with his parents. On 29 January 2002 he returned to Australia when his relationship with Ms P ended. The AAT found that the taxpayer's permanent place of abode was in the Philippines during the relevant years.

Weight of all factors

Applying IT 2650 and Mynott to your circumstances, it follows that as you have lived in Country X for more than two years, you have had continuity of presence and your actual length of your stay in Country X is substantial.

You have maintained bank accounts in Australia which are associated with your property loans.

Thus, you do have some durability of association with a particular place in Australia.

Weighing all the factors above in light of your individual circumstances, you have established a permanent place of abode outside Australia in Country X.

As the Commissioner is satisfied that you have a permanent place of abode outside Australia, you are not a resident of Australia for income tax purposes under this test.

3. The 183-day test
Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that your usual place of abode is outside Australia and you have no intention to take up residence here.

You have not been and do not intend to be present in Australia for more than 183 days continuously or intermittently. You return to Australia two to three times per year for family reasons, all other trips are for work purposes.

Thus, you are not a resident under this test.

4. The superannuation test

You will be a resident if you are eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or you are the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

Neither you nor your spouse have membership of any Australian superannuation funds.

Therefore, this test does not apply to you.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not an Australia resident for income tax purposes.

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