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This edited version has been archived due to the length of time since original publication.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: 1013026341943

Date of advice: 7 June 2016

Ruling

Subject: Residency - working overseas

Question

Are you a resident of Australia for income tax purposes whilst working overseas?

Answer

No.

This ruling applies for the following periods

Year ending 30 June 20xx

Year ending 30 June 20yy

Year ending 30 June 20zz

The scheme commenced on

20xx

Relevant facts

You were born in Australia are an Australian citizen

You also hold a foreign passport

You have residency working status in Country A

You lived permanently in Australia until a date in 20xx when you departed to live permanently or indefinitely in Country A

You moved to Country A to join a business partnership

Your role is non-transferable out of the region

You have invested significant sums of money into the partnership

You intend to reside in the Country A permanently and have no plans to return to Australia

You have leased a home in Country A where you and your family will live

You intend to purchase a home overseas

You do not have any assets overseas except for a bank account with a bank in Country A and your salary will be paid into that account

You have a former family home in Australia which you have rented out, and you own another property in Australia which is also rented

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1.

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

An Australian resident is defined in subsection 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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 paragraph 6(1)(a) of the 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 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 an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia if they meet the conditions of one of the other three tests.

1. The resides 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; have 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 your case, since your employment ties will be in Country A where you have an open-ended work contract, you will not be dwelling permanently or have a settled place of abode in Australia during the period you are working overseas. Therefore, you will not be considered as residing in Australia during that time.

2. The domicile test

Generally, if a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

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.

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.

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.

Although you maintain an association with Australia with your rental property, your associations with Country A are more significant since:

Based on these facts, it is therefore considered that you will have established a permanent place of abode in Country A. Therefore, you are not considered to be a resident of Australia for tax purposes under the domicile test.

Your residency status

As you are not deemed to be an Australian resident for income tax purposes under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you will not be considered to be an Australian resident from the date of your departure from Australia.

ATO view documents

Taxation Ruling IT 2650.

Does Part IVA, or any other anti-avoidance provision, apply to this ruling?

The ruling is limited to the question raised.

Keywords

Domicile tests

Resident/Residency

Residents departing Australia

Non resident individuals

Technical Assurance

This advice satisfies corporate procedures around legal reasoning and decision making.

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