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This edited version has been archived due to the length of time since original publication.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

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012986077925

Date of advice: 17 March 2016

Ruling

Subject: Residency

Questions and answers:

This ruling applies for the following period:

1 July 20XX to 30 June 20ZZ.

The scheme commenced on:

1 July 20XX.

Relevant facts and circumstances:

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were born in Country A.

You are a Country A citizen.

You have a spouse and children.

Your spouse and children (your family) were also born in Country A and are also Country A citizens.

You and your family came to Australia in 20WW from Country A.

You and your spouse came to Australia on a permanent residence visa and became Australian citizens in 20YY.

You and your spouse applied for permanent residency and citizenship of Australia because you wanted to become Australian.

Your spouse works for an international company and you and your children travel with them to wherever the work takes them.

You and your family returned to Country A in 20YY because of a 12 month assignment taken up by your spouse with their employer.

You have a 12 month lease on a rented residence in Country A where you are living with your family and you have enrolled your children in school in Country A.

You are not sure how long you will remain in Country A but you and your spouse are considering an offer from their employer to relocate permanently to Country A.

You and your family might return to Australia to live but do not know when this will happen.

From the beginning of July 20YY you have been a Country A resident for taxation purposes and you will pay tax in Country A for the period you are living and working there.

Your assets in Country A are a family home, financial accounts, motor vehicles and household effects.

During the period you resided in Australia you were living in a rental property.

When you left Australia you shipped some personal and household effects to Country A and sold or discarded the rest.

You had your name removed from the Australian Electoral Roll when you left Australia.

You have no family or property remaining in Australia.

You have your own business providing labour and consultancy services to a specific industry.

You operated this business in Australia as an individual/sole trader.

You have left your Australian business insurance in place to accommodate any future requests from former clients but do not anticipate that will come to fruition. Any work you do for Australian clients will be done from Country A.

You do not have a fixed base available in Australia from which you could perform any activities in relation to your Australian business.

The only assets you have in Australia are a personal superannuation account and a bank account. You use the bank account to pay for accounting and phone expenses and insurance cover for your business.

You do not plan to spend more than a total of 183 days in Australia in any of the financial years between the period 1 July 20YY and 30 June 20ZZ.

The Commonwealth superannuation test does not apply to you.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 995-1(1).

Income Tax Assessment Act 1936 Section 6(1).

Reasons for decision

Assessable income - general

Sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provide that:

Income earned by an individual through the operation of a business as a sole trader is ordinary income and will be assessable to an individual who is a resident of Australia for taxation purposes, regardless of its source. However, for an individual who is a non-resident of Australia for taxation purposes, such income would only be assessable in Australia if it is considered to have an Australian source.

The 'source' of income is a concept that has been considered by the courts and is generally accepted to be the place where the work that leads to the income is physically carried out. You have indicated you may perform work in America for some Australian clients of an Australian business you operate as an individual/sole trader. If that transpires, we would consider any income earn from such work to be from a source outside Australia and that income would only be included in your assessable income in Australia if you are an Australian resident for taxation purposes.

Residency for taxation purposes

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes 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', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

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

Based on the facts you have provided, we can conclude that you will not satisfy any of the tests of residency during the period June 20YY to 30 June 20ZZ and will be a non-resident of Australia for taxation purposes during that time.

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