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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1012837195481

Date of advice: 3 August 2015

Ruling

Subject: Residency and leaving Australia

Questions and answers

Are you a resident of Australia for taxation purposes while you are working in Country B?

No

This ruling applies for the following period

Year ended 30 June 2016

Year ended 30 June 2017

The scheme commenced on

1 July 2015

Relevant facts

You are a citizen of Australia.

You have a long Term Employment Pass in Country A.

You intend to reside overseas permanently or until you can no longer find employment overseas.

You left Australia to take up employment in Country A prior to this year.

You are now moving from Country A to Country B where you have employment.

You have an employment contract overseas that is likely to be extended.

You currently pay tax on your income in Country A and will pay tax in Country B on your income there.

Your spouse is living with you in Country A and will be accompanying you to Country B.

You return to Australia 1 to 2 times per year.

You have been living in rented accommodation in Country A.

You will be living in rented accommodation in Country B.

You have a Country A bank account.

You own a house in Australia.

This is currently being rented out.

You have family and friends living in Australia. You have no sporting connections with Australia.

You have friends living in Country A. You have no sporting connections with Country A.

Neither you nor your spouse were Commonwealth of Australia employees.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1).

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

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:

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 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.

Residency 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'.

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:

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive.

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

You are not physically residing in Australia.

You have lived in rental accommodation in Country A for some years.

You have lived in Country A for some years and will be moving to Country B to commence work for at least 12 months.

You have returned to Australia for periods of two weeks to visit friends and other purposes. You have not returned for work purposes.

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 whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin.

Your domicile of origin is Australia.

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 their 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.

In your case, your association with the foreign country is considered more significant than with Australia for the following reasons;

Based on these facts, it is considered that, while your domicile of origin is Australia, you have established a permanent place of abode in the foreign country.

The 183-day 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.

You do not satisfy this test as you will be here for less than 183 days and do not intend to return to live.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Generally this would include a permanent or temporary employee of the Australian Public Service (APS).

As you are not nor have been a Commonwealth Government employee, you are not considered to be a resident of Australia under the superannuation test.

Conclusion - your residency status

Based on the facts you have provided, you do not meet any of the residency tests and are therefore not a resident of Australia for tax purposes.

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