Edited version of your written advice

Authorisation Number: 1051274005725

Date of advice: 28 August 2017

Ruling

Subject: Residency - leaving Australia

Question 1

Are you a resident for taxation purposes from your date of departure?

Answer

No.

This ruling applies for the following period(s)

Year ended 30 June 201B

The scheme commences on

1 July 201A

Relevant facts and circumstances

You moved to Country X in spring.

You have a Country X working Visa.

You are employed on a one year rolling contact with your Country X employer.

Government regulation in Country X means you can only obtain a one year rolling contract.

Your contract has been renewed once in 201B.

You are required to visit other countries during your employment but it is based predominantly in Country X.

Your employer provides a furnished apartment solely for you and your spouse’s use.

You cannot legally purchase accommodation in your own name.

You are currently on unpaid leave from your Australian employer.

Your unpaid leave has been recently extended to 201D where it will be reviewed again.

You have not resigned from your Australian employer due to having accrued entitlements such as significant redundancy rights. There has been restructuring that you suggest means that your old position no longer exists.

You had significant annual leave and long service leave owing from your employment at your Australian employer which is salary sacrificed into your existing Australian superannuation fund.

Your remuneration in Country X is deposited into a Country X bank account in their currency. This account is used for your day to day expenses.

Your spouse has also moved to Country X. They moved in 201B after finalising the sale of your Australian home. They have been offered work in Country X however prefers to spend time on their social activities.

Your spouse retains a rental property in Australia which is rented to your parent.

You sold the family car and household furniture you had in Australia.

You retained in storage in Australia family heirlooms and other items that could not be disposed of in a short period of time.

You have funds deposited in an Australian bank account that generate passive income. The bank has been notified that you are no longer a resident and withholding tax on this income is remitted to the ATO.

You returned to Australia for a small number of days in the 201B and 201C financial year for various reasons including:

● Signing the contract for the house sale

● Visiting terminally ill family

● Receiving medical treatment

● Work required visits.

You have stated you have no desire to return to Australia in the medium term (3-5 years) and want to reside in Country X as long as your contract is renewed. If your contract was not renewed then you would seek employment in other countries.

You and your spouse are not eligible to contribute the PSS or CSS a Commonwealth Superannuation Schemes.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Subsection 6(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 resides test,

● the domicile test,

● the 183 day test, and

● 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 an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides 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.

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.

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.

You left Australia on your date of departure and have taken up work in Country X. You have developed social ties to Country X and your spouse has joined you in living there. You have only returned to Australia briefly since moving. You are unable to purchase housing due to Country X’s laws prohibiting this. You are also unable to obtain more than a one year contract with your employer due to government regulation. However your contract has been extended once and you have an expectation that it will be renewed again.

You still have employment in Australia however have taken unpaid leave from this role. This unpaid leave has been extended into 201D. You have not terminated your employment yet due to potential redundancy benefits that will accrue. You have not worked in this role since moving to Country X.

In the case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.

In your circumstances, your family and social ties are with Country X and you maintain no Australian place of abode. You maintain minimal Australian assets. It is considered that from the time you left Australia in 201A that you were not a resident from your date of departure under this test.

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 were born in Australia and your domicile of origin is Australia. However upon on leaving Australia, you developed strong ties to Country X. You and your spouse both moved to live there. However due to the short amount of time, you have spent in Country X, the non-permanent nature of your work and accommodation arrangements, we cannot be satisfied that you have abandoned your domicile of Australia.

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.

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 intended and actual length of the individual’s stay in the overseas country;

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

(e) the establishment of a home outside Australia;

(f) the abandonment of any residence or place of abode the individual may have had in Australia;

(g) the duration and continuity of the individual’s presence in the overseas country; and

(h) 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.

You developed strong social ties to Country X including joining sporting clubs and the local library. You have not been able to establish your own home in Country X due to laws in the country which prohibit this. You do have accommodation provided to you in Country X by your employer which is for your sole use. You have no stated desire to return to Australia and hope to reside in Country X for the near future. You have retained minimal association with Australia besides the job situation discussed above and an Australian bank account. You sold your major Australian assets including your family home.

We are satisfied you have established a permanent place of above outside Australia. You are not considered to be a resident from your date of departure under this test.

183 days test

You have not been in Australia for more than 183 days in the financial year. Therefore you do not satisfy this test

The superannuation test

You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth Super Funds. Therefore you are not a resident under this test.

Your residency status

You do not satisfy any of the tests of residency. Therefore you will be considered a non-resident for taxation purposes from your date of departure to Country X.

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