Disclaimer
This edited version has been archived due to the length of time since original publication.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: 1051186947829

Date of advice: 31 March 2017

Ruling

Subject: Residency

Question

Did you become a non-resident of Australia for taxation purposes from when you departed Australia on XX 2016?

Answer

Yes.

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

The scheme commenced on

1 July 2015

Relevant facts and circumstances

General

You have dual citizenship of Australia and of foreign country A. Your country of origin is foreign country A. You moved to Australia from foreign country A and obtained citizenship in Australia.

You accepted a permanent position in a foreign country B with an open ended contract.

You permanently departed Australia to commence your employment in foreign country B on XX 2016.

Your spouse joined you in foreign country B on XX 2016. Your spouse remained in Australia to assist with the sale of your home in Australia.

Neither you nor your spouse has any plans to return to Australia on a permanent basis.

You and your spouse have adult children who reside in separate rental accommodation in Australia.

You have not been granted permanent residency by any country. Your foreign country B visa was approved. The visa does not grant you permanent residency. It is initially for a period of 2 years after which it can be renewed for 3 further years. It was supplied by your employer in foreign country B.

You informed the Australian Electoral Commission (but not Medicare) that you were departing Australia.

You did not advise your private health insurance provider to have your policy suspended or cancelled. A visit took place to your private health insurer to discuss you and your spouse's relocation to foreign country B but you still need a child to be covered by the insurance policy. Based on the advice from the insurer the policy was maintained. The insurer noted the circumstances of the policy holders.

You will lodge foreign country B income tax returns while you are overseas. You will you state that you are a resident of foreign country B.

You returned to Australia during the following periods for the reasons noted:

On your return visits to Australia, you resided in your Australian property until sale and then with your children.

You completed your immigration cards on departure from Australia to foreign country B as "Australian resident permanently departing".

Accommodation

You and your spouse engaged a real estate agent to sell your Australian property and marketing of the property began. The sale of this residence was completed.

Under company policy, you and your spouse were provided with temporary accommodation in foreign country B for the first X days. You and your spouse entered into a long term lease on a property in foreign country B and commenced tenancy. Your accommodation in foreign country B is a condominium. This lease is in yours and your spouse's names and is for your exclusive use. You have supplied a copy of the lease. The term of the lease is two years, as per the lease agreement.

Assets

You and your spouse's assets in Australia are or were the following:

You and your spouse shipped your household belongings to foreign country B.

You and your spouse's foreign assets include the following:

You will not make any investments in Australia while you were overseas.

Your only income from Australian sources is minimal bank interest.

You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted. Your bank will be notified of this.

Social connections

You are not a member of any professional organisations in Australia or in foreign country B.

You have not obtained any overseas qualifications.

Neither you nor spouse is an active member of an Australian Commonwealth Government superannuation fund.

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)

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 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.

In your case, you were born in foreign country A and have citizenship of that country. You moved to Australia and became a citizen of Australia also.

Therefore, your domicile of origin was foreign country A and you changed your domicile to Australia when you moved to Australia and acquired Australian citizenship. Your domicile will still be Australia while you are living and working in foreign country B as you have not indicated that you will be taking any legal steps to change your domicile to that country.

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.

We are however of the view that you and your spouse can successfully demonstrate that their permanent place of abode for the foreseeable future is in foreign country B. This is supported by the following factors:

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

Therefore, you are not a resident of Australia under the 'domicile and permanent place of abode' test of residency for the period of the ruling.

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 or will not be present in Australia for a total period of more than half of a year of income.

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 spouse is eligible to contribute to the PSS or the CSS. Further, you are more than 16 years of age.

Therefore, you are not a resident of Australia under the superannuation test for the period of the ruling.

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 an Australian resident for taxation purposes for the period of the ruling.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).