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This edited version has been archived due to the length of time since original publication.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: 1051179768663

Date of advice: 16 January 2017

Ruling

Subject: Residency and deemed disposal

Question 1

Are you an Australian resident for income tax purposes?

Answer

No

Question 2

Will CGT event I1 happen to your existing home in Australia?

Answer

No

This ruling applies for the following periods:

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You intend to move to Country X permanently in 201X financial year.

You have a visa that allows you to enter Country X.

Your current visa allows you to stay for maximum n months.

You will apply for another visa after that, which will allow you to stay for m months.

The visa can be renewed every m months.

You will be working full time in Country Y.

You have a working visa that allows you to enter Country Y.

You will be working in Country Y approximately 200 days per year.

Your employment is for b years.

Your employment can be extended.

You will return to Country X while not working.

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

You intend to visit Australia couple of times per year.

Each stay is expected to be maximum 14 days.

You have informed the Australian Electoral Commission and Medicare that you are departing Australia.

You have advised your private health insurance provider to have your policy suspended or cancelled.

You rent a property in Country X.

The rental agreement was signed for z years.

You can renew your rental agreement in the future.

You have paid the rent for the first v months.

You will pay the rest rent before you move to Country X

You will be living in an accommodation on site while in Country Y

Your accommodation in Country Y will be provided by your employer.

Your accommodation in Country Y will be shared with other employees during periods of absence.

You lived in your own home in Australia prior to leaving.

You do not intend to rent out your Australia property.

You will maintain bank accounts in Australia.

You will retain a car in Australia.

You do not intend to make any investments in Australia while overseas.

You intend to give your household effects in Australia to your family.

You intend to take your personal effects in Australia to Country X.

The only income you will receive from Australia is small amounts of interest.

You have advised Australian financial institutions with whom you have investments with that you are a foreign resident so that non-resident withholding tax can be deducted.

You intend to acquire assets in Country X.

The Country Y's tax will be deducted from your wages.

You will not lodge any foreign income tax returns while living overseas.

You have a spouse.

Your spouse will accompany you to Country X.

Your spouse intends to reside overseas indefinitely.

Your spouse will remain in Country X while you are working in Country Y.

You intend establish social and sporting associations in Country X

You intend to obtain a Country X's driver's licence and other licences or registrations as required.

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

Both you and your spouse are not Commonwealth Government of Australia employees for superannuation purposes.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

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

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 110-10

Income Tax Assessment Act 1997 Subsection 104-160(3)

Income Tax Assessment Act 1997 Section 885-15

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

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.

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 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 your case, you intend to move to Country X permanently in 201X financial year. You have informed the Australian Electoral Commission and Medicare that you are departing Australia. You have advised your private health insurance provider to have your policy suspended or cancelled. You intend to give your household effects in Australia to your family. You intend to take your personal effects in Australia to Country X. You rent a property in Country X. The rental agreement was signed for z years and can be renewed. You have paid the rent for the first v months. You will pay the rest rent before you move to Country X. You intend to establish social and sporting associations in Country X. You intend to obtain a Country X's driver's licence and other licences or registrations as required.

Therefore, you are not a resident under this test.

The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

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.

In your case, you were born in Australia and you are a citizen of Australia; therefore, your domicile of origin is Australia.

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.

The Commissioner is satisfied that you have a permanent place of abode outside Australia from the date you move to Country X permanently for the following reasons:

Therefore, you are not a resident under this test from the date you move to Country X permanently.

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 intend to visit Australia couple of times per year. And each stay is expected to be maximum 14 days. You will not be in Australia for more than 183 days in any financial year while you are living in Country X.

You are not a 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 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.

Your residency status

Based on the facts you have provided, you are not a resident of Australia for income tax purposes.

Capital gains tax

Section 100-10 of the ITAA 1997 explains that capital gains tax (CGT) is the income tax you pay on any net capital gain you make as a result of a CGT event being triggered. This capital gain is included in your annual income tax return and you are taxed at your marginal tax rate.

CGT event I1 occurs if you stop being an Australian resident. The time of CGT event I1 is when you stop being a resident.

CGT event I1 applies to all of your world-wide assets that are not taxable Australian property. You are considered to have disposed of each of these assets at their market value on the day you stop being an Australian resident.

The exceptions are contained in subsection 104-160(3) of the ITAA 1997 which states that CGT event I1 does not apply to "taxable Australian property", defined in section 855-15 of the ITAA 1997 as:

In your case, your home in Australia meets the definition of the taxable Australian real property. Therefore, CGT event I1 will not apply to your home in Australia. However, CGT event I1 will occur for all your remaining assets unless you make a choice under section 104-165(2) for any gains or losses to be disregarded, in which case all your other assets are taken to be taxable Australian property.

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