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This edited version has been archived due to the length of time since original publication.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: 1012844492391

Date of advice: 31 July 2015

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 commences on

1 August 2013

Relevant facts and circumstances

You are a citizen of Australia. You were born overseas but no longer hold citizenship of that country.

You left Australia to live and work in a foreign country.

You have not been granted permanent residency by a foreign country or any other country.

You and your spouse were granted a foreign country residency permit which expires.

If you cease working in a foreign country, you can stay for one month then you must depart the country.

You formed the intention to make your home indefinitely outside Australia.

You are employed in a foreign country on an initial contract of 24 months with an anticipated period of more than 24 months.

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

Your intention is to stay indefinitely in a foreign country. You have no plans to return to Australia. You do not hold a return airline ticket.

Your employer did not provide accommodation for you. You sought and obtained accommodation in a rented property for sole use by you and your family members. You are not permitted to purchase a house in a foreign country. The rental term is for 12 months and is renewable after each 12 months.

You have a bank account and a credit card in a foreign country.

Personal private health insurance was taken out by you and your spouse in a foreign country.

All your personal affects assets have been transferred to a foreign country.

Your social and sporting connections with a foreign country are:

Your Australian main residence and motor vehicles have been provided to family members for their sole use. They are employed in Australia and will continue to reside in Australia.

You since leaving Australia you visited Australia these occasions:

You spouse has only visited Australia to provide support for a family member and will return to a foreign country as soon as possible.

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

You have you advised the Australian Electoral Office of your absence.

No other Australian sourced income or ties with Australia remain.

You advised Medicare of your departure and they advised that there was no need to cancel you membership as it would be automatically cancelled after 5 years of absence.

You have not lodged tax returns in any other countries and there is no income tax in a foreign country.

When completing the Australian Immigration Outgoing passenger card you stated as the reason for going overseas that you were leaving to take up employment overseas.

You are over 16 years of age.

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: 

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. 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'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936..

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 Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

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.

Summary of the resides test

As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning.

In your case, there are various factors that indicate that you are a resident as well as factors indicating you are not a resident. These are:

Factors indicating you are a resident:

Factors indicating you are a non-resident

Based on the above, you will retain some continuity of association with Australia while you are overseas. However, on balance, you will not be residing in Australia according to the ordinary meaning of the word as you connections with a foreign country will be stronger during the relevant period.

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

The domicile and permanent place of abode 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 your case, you were born overseas and moved to Australia, became a citizen of Australia and renounced your overseas citizenship. Your domicile of origin was overseas and you changed your domicile to Australia.

Your domicile will still be Australia while you are living and working in a foreign country as you have not become a permanent resident there and you have not indicated that you will be taking any legal steps to become a citizen of that country. As you have not established a new domicile of choice in a foreign country, your domicile remains 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.

In your case:

The Commissioner is satisfied that you have established a permanent place of abode outside of Australia.

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

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 the year of income and the Commissioner is satisfied that your usual place of abode is outside Australia.

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.

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

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

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

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 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.

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