Edited version of your written advice

Authorisation Number: 1013029464954

Date of advice: 7 June 2016

Ruling

Subject: Residency - departing Australia

Question 1

Are you a resident of Australia for income tax purposes from XX Month 2016?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

The scheme commences on:

XX Month 2016

Relevant facts and circumstances

Although you were born in Country A you are an Australian citizen and have lived in Australia since XXXX.

You have worked in Australian and departed Australian on XX Month 2016. You travelled to Country X where you intend to live with friends whilst seeking employment. Once you secure employment you intend to rent a house which you will occupy as your home.

You will establish local bank accounts once you arrive and will also purchase a car.

You do not own any property in Australia. You are attempting to sell your Australian car.

You have sold or disposed of almost all of your personal effects in Australia apart from some residual small personal effects which will also be shipped to the Country X once you have settled in.

You retain some Australian bank accounts for emergencies however most will be closed shortly. You plan to travel to Australia for approximately 1 week only later this year for personal reasons.

You have advised the Electoral Office, your health fund and Medicare that you have left Australia.

You have family in Australia who will remain resident in Australia however you have no spouse or children and are travelling alone to the Country X where you intend to establish a permanent abode.

You have the right to work in Country X for several years and intend to apply for permanent residency.

You have never been employed by the Commonwealth of Australian and hence are not eligible to join the PSS or CSS.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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) while Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17) outlines the guidelines used to determine whether the individual is a resident.

The definition provides four tests to ascertain if an individual is a resident of Australia for income tax purposes. These tests are:

1. The resides test (residence according to ordinary concepts)

2. The domicile test

3. The 183 day test

4. The superannuation test

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 the individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for income tax purposes 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. 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'.

TR 98/17 discusses the factors that are taken into account in assessing whether an individual's behaviour is consistent with residing in Australia.

Various court and Tribunal decisions have also considered the ordinary meaning of the word 'reside' with the recent being Pillay v. Commissioner of Taxation [2013] AATA 447; Sneddon v. Commissioner of Taxation [2012] ATC 10-264; [2012] AATA 516 (Sneddon), Iyengar v. Commissioner of Taxation [2011] ATC 10-222;[2011] AATA 856 (Iyengar).

The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year:

• Physical presence in Australia;

• Nationality;

• History of residence and movements;

• Habits and 'mode of life'

• Frequency, regularity and duration of visits to Australia;

• Purpose of visits to or absences from Australia;

• Family and business ties with Australia compare to the foreign country concerned; and

• Maintenance of a place of abode.

The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive.

In Joachim v. Federal Commissioner of Taxation 2002 ATC 2088; AATA 610, 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 involuntarily, a person does not necessarily cease to be a 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.

Physical presence in Australia

TR 98/17 considers physical presence or length of time by itself is not determinative of residency. An individual's behaviour as reflected by a degree of continuity, routine or habit that is consistent with residing here is relevant.

Nationality

You are a citizen of Australia but also have the right to work for years in the Country X. You also intend to apply for permanent residency.

Frequency, regularity and duration of visits to Australia

You intend to spend approximately 1 week visiting Australia in 2016 and have no other plans to visit Australia. Therefore you will not establish a regular pattern of visiting Australia.

Family and business ties with Australia

You have resigned from your Australian employment and have left your family to travel to Country X where you have no family. You intend to reside with friends until you can rent a flat or house which you will live in as a permanent abode.

You do not have a spouse or children in Australia. Your parents and other family will continue to reside in Australia.

Maintenance of a place of abode

You have moved out of your permanent abode in Australia and have sold or given away almost all personal effects. Your remaining effects will be shipped to the Country X once you are established there.

Based on all the facts, it is considered that on balance your behaviour is consistent with not residing in Australia and being considered a non-resident for tax purposes under the resides test.

2. The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and common law rules.

A person's domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you have left Australia and have chosen to live in the Country X.

It is considered that you have abandoned your domicile in Australia and acquired a domicile of choice in the Country X. You are entitled to work there for years and intend to apply for permanent residency.

Permanent place of abode

A person's 'permanent place of abode' is a question of fact to be determined in the light of all the circumstances of each case. (Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (Applegate))

In Applegate, the court found that 'permanent' does not mean everlasting or forever but it is to be contrasted with temporary or transitory.

The courts have considered 'place of abode' to refer to a person's residence, where he lives with his family and sleeps at night.

In Applegate, the judge Fisher J made the following comments when analysing the expression 'permanent place of abode'

To my mind the proper construction to place upon the phrase 'permanent place of abode' is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.

Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual's permanent place of abode. These factors include:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) any intention either to return to Australia at some definite point in time or to travel to another country;

(c) the establishment of a home outside Australia;

(d) the abandonment of any residence or place of abode the individual may have had in 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, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer's children, family ties.

Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors.

Based on all the facts, the Commissioner is satisfied you no longer have a permanent place of abode in Australia. Therefore you are considered a non-resident of Australia under this test.

1. The 183 days 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.

This test is applicable to new arrivals in Australia rather than those leaving Australia.

In your circumstances your travel to Australia is limited to a brief, 1 week, visit, for personal reasons. Hence you do not exceed this limit and this test does not apply in your circumstances.

4. The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You will not be treated as a resident under this test.

Residency status

As you do not satisfy any of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not a resident of Australia for income tax purposes for the years ended 30 June 2016, 30 June 2017 and 30 June 2018.

ATO view documents

Taxation Ruling TR 98/17 - Income tax: residency status of individuals entering Australia

Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia

Taxation Ruling IT 2650A (Addendum) - Income tax: residency - permanent place of abode outside Australia

Other references (Non ATO view - example court cases, etc):

Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01

Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014)

Federal Commissioner of Taxation v Miller [1946] HCA 23; (1946) 73 CLR 93.

Levene v Inland Revenue Commissioners [1928] UKHL 1; [1928] AC 217.

Applegate v Federal Commissioner of Taxation [1978] 1 NSWLR 126

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