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This edited version has been archived due to the length of time since original publication.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: 1013073814019

Date of advice: 22 August 2016

Ruling

Subject: Residency for tax purposes

Question and answer

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods

Year ended 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commenced on

X January 2016

Relevant facts and circumstances

General

You were born in Australia and you are an Australian citizen. You are not a citizen of any country other than Australia.

You departed Australia for foreign country X. Initially you resided in hotel accommodation. This was temporary until you could secure a long term lease on alternative accommodation. You spend this time actively looking for long term accommodation.

You secured a 12 month lease on a house in foreign country X. The rental accommodation is for your exclusive use and is fully furnished.

You hold a tourist visa for entry into foreign country X which permits a short term day stay in the country. This is favourable to you as your employment requires you to leave the country regularly for work.

You have relocated from foreign country X to foreign country Y.

You enter foreign country y on a multi-entry visa which is maintained by you and it is your responsibility to renew it regularly. This is more cost effective than obtaining a long-term visa in foreign country Y. You have supplied a copy of your visa.

In foreign country Y in live in rented accommodation.

You have supplied a copy of a proof of residence document for foreign country Y.

You have not been granted permanent residency by any country.

Your visas were not supplied by an employer.

It is your intention to remain overseas for at least several years.

You intend visiting Australia occasionally in order to visit immediate family and your lawyer in relation to your divorce settlement. While visiting Australia you will stay with friends or at a relative's residence. The anticipated length of visits is for a few weeks at a time. After your divorce proceedings have been finalised you intend visiting Australia once or twice a year. Until then, you will visit depending on when you need to be legally present in Australia.

You intend advising the Australian Electoral Commission of your departure from Australia.

When completing incoming and outgoing passenger cards, you stated you permanently departing Australia. The foreign country X and foreign country Y addresses were used.

You will likely travel on your time off from work.

You are no longer registered for private health insurance in Australia.

You have retained your Medicare registration since your departure from Australia but you intend cancelling it.

You have not lodged Australian tax returns since departing Australia. An Australian tax return will be lodged on a non-resident basis for the 2015/16 income year, pending the ruling decision. You have not yet lodged any tax returns in foreign country Y as you are waiting on the private ruling outcome. You intend lodging tax returns in foreign country Y if you are no longer regarded as resident of Australia for tax purposes.

You or your ex-spouse has never 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.

Employment

You are currently employed with a foreign company on an open-ended contract.

Your work requires you to work in international and Australian waters with a usual work rotation of 28 days on 28 days off.

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

Your employer does not provide any accommodation outside of Australia.

Family and social connections

You are divorced from your ex-spouse. You are at present single.

You have a young child who remains with your ex-spouse in Australia.

You do not maintain any professional or social associations in Australia.

You have become a member of a club in foreign country Y.

You have applied for and been granted a driver's licence in country Y

You do not maintain any professional or occupational memberships in Australia.

Assets

You have opened a bank account in foreign country X, in which you will be depositing your employment income.

You maintain no property in Australia. Your previous residence was sold. You had not occupied the property since separating from you ex-spouse.

You sold your motor vehicle prior to departing Australia. The only other assets you held in Australia were motorcycles which had been stored at a relative's house but which were sold.

You still hold a bank account in Australia in the form of a cheque account. The cheque account is used to pay child support for your child as well as mandatory spousal payments following your divorce. There are no other debits from this account.

Upon arrival in foreign country X, you had a large container filled with your household items stored in Australia. This will be shipped to your relative's residence.

Apart from the bank account you have opened in foreign country X, you have purchased the following since relocating to foreign country Y:

You intend purchasing a property (rather than leasing) once funds permit such an investment.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(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:

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

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

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 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.

There are several factors outlined above which indicate that you have not ceased to be a resident of Australia, specifically:

Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the relevant period.

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. The 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.

As you are still an Australian citizen while living overseas, your domicile is Australia and remains unchanged.

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.

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.

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.

You have departed Australia to live and work overseas for at least several years. You have sold the house you lived in Australia and have taken long term leases first in foreign country X and now in foreign country Y. You intend buying a place to live overseas.

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

Therefore, you will not be a resident of Australia under the 'domicile and permanent place of abode' 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 a year of income from the date you departed 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.

You have stated that neither you nor your ex-spouse is eligible to contribute to the PSS or 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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