Edited version of your written advice

Authorisation Number: 1012775710188

Ruling

Subject: Residency

Question and answer

Are you resident of Australia for tax purposes from the date you left Australia?

No

This ruling applies for the following periods:

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

The scheme commenced on:

5 March 2015

Relevant facts and circumstances

Your country of origin is Australia and you are an Australian citizen.

You are not a citizen of any other country.

You are departing Australia soon to take up an employment position in country X.

Your employment contract is for three years followed by an in-company transfer.

You commence employment with your employer soon after arriving in country X.

Your spouse is moving to country X with you and also intends to work.

You both intend to live in country X for an indefinite period of time but definitely for six years or more.

Prior to leaving Australia you were renting a small apartment. You have sold or donated most of your possessions such as cars, whitegoods, furniture, appliances, electronics and clothing.

You have Australian bank accounts and superannuation. Your bank accounts will remain open until you finalise your departure from Australia. You have some company allocated shares which will only be provided following your last day of employment and you intend to sell them in the future.

You will have your name removed from the Australian Electoral Roll and the paperwork has been submitted.

You have cancelled your health insurance and advised Medicare of your departure from Australia.

You and your spouse will be living in an apartment in country X.

Your apartment will be unfurnished and you will purchase all your housing items such as whitegoods and bedroom furniture.

Your employer will pay you a housing allowance in lieu of company provided accommodation.

You plan on opening bank accounts in country X and intend to purchase a vehicle.

Neither you nor your spouse are eligible employees in the CSS or PSS.

You intend to return to Australia only for short visits to see family.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5

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:

• the resides test,

• the domicile test,

• the 183 day test, and

• the Commonwealth superannuation fund test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

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'.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:

(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 with Australia compared to the foreign country concerned, and

(viii) maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

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.

You will be departing Australia to work and live in country X for an indefinite period of time. Your spouse is moving to country X with you and you have made plans to leave Australia permanently.

Although you will be outside of Australia due to working overseas, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above.

(ii) Nationality

Your country of origin is Australia and you are a citizen of Australia.

(iii) History of residence and movements

You are leaving Australia to take up employment in country X and plan to be there for at least 6 years.

(iv) Habits and 'mode of life'

In country X you will be working for the same employer and living in rental accommodation with your spouse who will also work in country X.

You intend purchasing a vehicle for your private use in country X.

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

You only intend to return to Australia for short visits to see family.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is to take up employment.

(vii) Family, business and financial ties

Family

Your spouse is moving with you to country X.

Business or economic

You will be working for an overseas company and have a three year contract followed by an in-company transfer.

Your only Australian assets are bank accounts, superannuation and shares.

You do not have any assets overseas as yet but intend to purchase a car, household furniture and goods and open up bank accounts.

(viii) Maintenance of a place of abode in Australia

You do not own any properties in Australia.

Summary of the resides test

In your case, you will not be residing in Australia for the purposes of the resides test for the following reasons:

• You have left Australia with your spouse to take up employment in country X.

• You will be renting a private apartment which you will furnish with your own household items.

• You intend to purchase a vehicle and open up bank accounts in country X.

• You will be overseas for an indefinite period of time.

• You have limited assets in Australia such as bank accounts, superannuation and shares.

• You will only return to Australia for short visits to see family.

Other residency tests

Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test.

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

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.

Your country of origin is Australia and you are an Australian citizen, therefore your domicile remains Australia.

Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

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 (paragraph 12 of IT 2650).

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere (paragraph 14 of IT 2650).

It is clear from the 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.

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.

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 your case, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia for the following reasons:

• You have left Australia to take up employment in country X on a three year contract followed by an in-company transfer. You intend to work and live in country X for a minimum of six years.

• You have sold or donated all of your possessions in Australia prior to your departure.

• You will be living in a rental property in country X which will be furnished with your own belongings.

• Your wife is moving to country X with you and will also work in country X.

• Your visits back to Australia will be minimal and for holiday purposes only to visit family.

• You are intending to stay in country X for the foreseeable future and do not have plans to return to Australia.

• You have informed relevant Australian authorities of your departure from Australia - such as advising your bank and superannuation company; Australian Electoral Roll, Medicare and health insurance provider.

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 will not be present in Australia for more than 183 days in the years ended 30 June 2015, 2016 and 2017. 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 were members of a relevant superannuation scheme and not an eligible employee for the purposes of the Superannuation Act 1976.

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.

Part year tax free threshold

Where a taxpayer either becomes a resident or ceases to be a resident of Australia during a year of income, the period of part-year residency for calculating the pro-rating of the tax-free threshold is determined under section 18 of the Income Tax Rates Act 1986 (Rates Act).

Your tax-free threshold will be pro-rated according to your departure date out of Australia.

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).