Edited version of your written advice

Authorisation Number: 1013059257243

Date of advice: 27 July 2016

Ruling

Subject: Residency and leaving Australia

Question

Are you a resident of Australia for income tax purposes from October 20XX?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2014

Year ended 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Country X by birth.

You were granted permanent residency of Australia in 20WW.

Since early 20XX you have lived apart from your family, having separated from your spouse at that time, and only returned to Australia on an ad-hoc basis for organised visits to see your child.

You departed Australia in 20XX to permanently live in Country Y, and to work primarily in Country Y (your office), and to also sometimes work in Country Z (the Corporate head office).

You have been employed with the Australian branch of a multinational employer based in Country Z since early in 20XX. When you and your spouse decided to separate, you requested a transfer, and you were transferred to a city in Country Y, where you are currently living and working.

You were granted permanent residency in Country Y in 20ZZ.

You have a Country X passport, which you use to travel exclusively on.

When you left for Country Y, the initial visa that allowed you to enter the country was a long term employment visa, which was valid for a period of one year. The visa was financially sponsored by your employer.

When you left for Country Y, you intended to permanently relocate there.

After departing for Country Y, you have frequently returned to Australia to visit your child. You have an amicable arrangement with your spouse in order to do this.

In 20ZZ, you visited to Australia a few times, for a total of a couple of months to visit your child.

You have not advised Medicare or the Australian Electoral Commission that you have departed Australia.

You have not cancelled your Australian private health insurance policy, as you have agreed to retain this as part of your obligation to support your family.

You have taken out a private health insurance policy in Country Y.

You are living in a rented apartment in Country Y which you have sourced and fully furnished appropriately yourself, where the current lease agreement is for 12 months.

You are now eligible for a mortgage in Country Y, and are currently looking into the purchase of an apartment in the same building where you are currently residing.

You still hold a joint bank account in Australia with your spouse, to assist with meeting your financial obligations to your family.

You maintain your own bank accounts in Country Y, along with credit accounts.

You maintain a motor vehicle in Australia, which you use during your visits to your child.

You also have some larger goods in your parent's garage in Australia.

When you left for Country Y, furnishings, household goods and whitegoods were left with your spouse and child, and you took other household items and personal effects to Country Y.

You do not receive income from Australian sources.

You do not own a car in Country Y, as your preference is to use taxi's as it is cheaper.

You have submitted resident tax returns in Country Y for the last few financial years. You retain the services of a local accountant in Country Y to manage your tax affairs.

Prior to leaving for Country Y, after you and your spouse separated amicably, as part of your obligation to your family you sourced and provided them with appropriate accommodation, which was a rental property. In return for this you will enjoy regular and unrestricted visits with your child.

You have not formally separated from your spouse through any legal process, due to the costs involved. As you are not disputing any custody or financial obligations, you and your spouse decided that the money would be better spent elsewhere.

You aim to visit your child several times a year, on a monthly basis, where you anticipate the each visit will be for a couple of days, or up to a week if this fits in with your employment.

Your spouse will be paying for all of their day to day living costs, apart from the private health insurance policy.

You are currently repatriating a set amount in Australian dollars per calendar month back to Australia to cover your spouse's accommodation and private health insurance policy. You usually transfer several months' worth in a single transaction to save time.

In 20ZZ you transferred a significant sum of money to Australia which was used to fund a deposit on a new house in Australia, in which your spouse and child would live in.

You and your spouse's name are listed on the title of this property. Should you live longer than your child's graduation, any profits realised on any eventual sale of the property would totally revert to you.

When you come to Australia to visit your child, depending on the situation, you may stay at the family home, or if this is inconvenient for your spouse, depending on their social circumstances at the time, you will either stay at your parent's house or with friends.

Your spouse and child did not accompany you to live in Country Y, and they intend on continuing to reside in Australia. Part of this reason was to retain stability with your child's education.

You have two siblings who live in Australia, however you are not close to them, and living apart from them does not represent a problem.

You have not maintained any professional, social or sporting connections with Australia.

You have joined a few social clubs in Country Y.

You have completed some local qualifications in Country Y to support your current employment.

You do not maintain any other financial, business or family ties to Australia.

Neither you nor your spouse has ever been employed by the Commonwealth of Australia.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse of a person who is a member of the PSS or an eligible employee in respect of the CSS.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1).

Reasons for decision

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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

• the resides test,

• the domicile test,

• the 183 day test, and

• the superannuation test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.

The resides (ordinary concepts) 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'.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(i) Physical presence in Australia

(ii) Nationality

(iii) History of residence and movements

(iv) Habits and "mode of life"

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruing IT 2650 - Income tax: residency - permanent place of abode outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

In deciding cases of residency, the courts and tribunals have noted that a person does not necessarily cease to be a resident because he or she is physically absent from a place. Instead, the test is whether the person has retained a continuity of association with a place, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation [2002] ATC 2088).

In your case:

• You have been permanently living and working in Country Y since 20XX.

• You have attained permanent residency in Country Y in 20ZZ.

• You do not intend on returning to Australia to live.

Whilst your spouse and child remain living in Australia, you and your spouse are separated, and you have an amicable arrangement with your spouse whereby in exchange for financial support you will have unrestricted access to visits with your child.

You intend on visiting your child several times a year, with each visit planned to be anywhere from a couple of days to a week in duration.

We consider your circumstances are closely aligned with those in The Engineering Manager and Commissioner of Taxation [2014] AATA 969 (Engineering Manager), where the taxpayer was found to be a non-resident for taxation purposes.

In this case the taxpayer was living and working overseas, and was also separated from their spouse, who remained living in Australia with their child. The taxpayer was found to be a non-resident for taxation purposes.

Accordingly you are not residing in Australia.

As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency.

The domicile 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

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.

This intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

You are a citizen of Country X, having been born there, and you were granted permanent residency of Australia in 20WW.

However, as you became a permanent resident of Country Y in 20ZZ, your domicile has changed to that country.

Therefore, you will be a non-resident under this test.

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 will not be in Australia for more than 183 days during the relevant years.

You are a non-resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the 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.

You are not eligible to contribute to the relevant Commonwealth super funds.

You are not a resident under this test.

Your residency status

You are not a resident of Australia for income tax purposes from 1 October 20XX under subsection 6(1) of the ITAA 1936.

Other relevant comments

Part-year residency

Where a taxpayer is a resident for only part of the year, their income will be taxed entirely at resident rates. In other words, a person is not required to pay tax at resident and non-resident rates in one income year.

As a result, the following will apply to a part-year resident taxpayer: 

• the foreign source income received by that person during the non-resident period is not assessable in Australia, and

• the tax-free threshold will be apportioned based on the number of months in the income year that the person was a resident.

Based on the information above, if you need to lodge an amendment to your 20XX-YY financial year individual income tax return, you can refer to reference QC 33887 on www.ato.gov.au for information on correcting and amending an income tax return.

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