Edited version of your written advice

Authorisation Number: 1051280832083

Date of advice: 8 September 2017

Ruling

Subject: Residency status

Question 1

Will the taxpayer be a non-resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936, for the income years ending 30 June 2018, 2019 and 2020?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You have chosen Country A as your new home and you intend to live there forever, with no present intention to return to Australia to live.

You have been taking active steps to achieve your relocation to Country A for at least the past 18 months.

You purchased a house in Country A, during the 2017 income year, in addition you have:

● relocated your personal effects to Country A

● opened bank accounts in Country A

● purchased real property in Country A

● sold your Australian home

● moved to Country A in the 2017 income year

● closed Australian bank accounts

● applied to be removed from the Australian Electoral Roll

● varied or cancelled your memberships in sporting and social community organisations

● reduced your level of involvement in your Australian business activities

● stated that you will visit Australia for business and social purposes, these visits will total no more than 100 days in the financial year

Assumption

This ruling is based on the assumption that your circumstances as outline above do not change.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1).

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

You will be a non-resident of Australia for the income years ending 2018, 2019, and 2020, as you do not satisfy any of the tests for residency outlined in the definition in subsection 6(1) of the Income Tax Assessment Act 1936 (‘ITAA 1936’).

Detailed reasoning

Subsection 6(1) of the ITAA 1936 defines non-resident as a person who is not a resident of Australia.

Subsection 6(1) of the ITAA 1936 defines ‘resident’ or ‘resident of Australia’ to mean:

(a) a person, other than a company, who resides in Australia and includes a person:

(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia;

(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or

(iii) who is:

(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

(B) an eligible employee for the purposes of the Superannuation Act 1976; or

(C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B).

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of ‘resides’. Residency status is a question of fact (and degree) and not of law: Federal Commissioner of Taxation v Miller [1946] HCA 23, (1946) 73 CLR 93.

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 statutory tests in subsection 6(1) of the ITAA 1936.

Although the question of whether a person ‘resides’ in a particular country is a question of fact and degree, the courts have referred to and taken into account various factors considered to be relevant to this question. For example, the individual’s living arrangements; the purpose, frequency and duration of visits to Australia; the extent of any business/employment ties with Australia; the extent of family and social ties with Australia; ownership of real estate in Australia; the location of other assets and personal effects; where bank accounts are maintained; and the nationality and citizenship of the individual.

You have stated that Country A is now your home, and you intend it to remain so, with no intention to return to Australia to live. You have lived in Country A from date X and you have not returned to Australia. Although you intend to return to Australia for the purpose of visiting family and/or friends, social engagements, holidaying or business, you estimate this to be no more than 100 days per year.

Based on the information in your private ruling application, you do not reside in Australia according to ordinary concepts.

Domicile

Domicile is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules, which the courts have developed in the field of private international law. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law.

The common law test of domicile of choice has now been restated in section 10 (Intention for domicile of choice) of the Domicile Act 1982, and states “The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country”.

Taxation Ruling IT 2650 Income tax: Residency – permanent place of abode outside Australia (IT 2650) provides guidelines to determine whether individuals who leave Australia to live overseas are residents of Australia for income tax purposes.

Paragraph 10 of IT 2650 states:

In determining a person’s domicile for the purposes of the definition of ‘resident’ in subsection 6(1), it is necessary to consider the person’s intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency…. On the other hand, if that person has in mind only a vague possibility of returning to Australia … such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country.

The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

You have chosen Country A as your new home. You have taken active steps over the previous 18 months to relocate to Country A, including disposing of your home in Australia and restructuring your social and business arrangements to facilitate your move to Country A. You state that you intend to live in Country A forever and you do not intend to return to Australia to live. Therefore, from 1 July 2017, it is considered that Country A is your domicile of choice.

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. However the expression ‘permanent place of abode has been held to mean a person’s “fixed and habitual place of abode” and to connote “a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there a usual place of abode.

in considering whether a person has acquired a ‘permanent place of abode’ outside Australia, Fisher J In Federal Commissioner of Taxation v Applegate (1979) FCA 37, stated that material factors for consideration will be the continuity or otherwise of the taxpayer’s presence, the duration of his presence and durability of his association with the particular place.

Based on your private ruling application, you have sold your home in Australia and established a new home in Country A. You have purchased two further properties in Country A, and you have relocated your personal effects to Country A. You intend to remain in Country A for ever and do not intend to return to Australia to live. Although you have l business and social relationships to Australia, you have restructured your affairs to facilitate your relocation to Country A, and you anticipate reducing your Australian business operations over time.

These factors indicate that you have established and intend to maintain an enduring relationship with Country A.

183 day Test

An individual will be regarded as being a resident if the individual has been in Australia for more than one-half of the income year (continuously or intermittently), unless the Commissioner can be satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

If the precondition for the application of the 183 day test is met, ie being in Australia for more than one half of the year of income, there is a presumption that the person is a resident. This presumption will only be defeated if, the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that person does not intend to take up residence in Australia.

The test has two conditions; firstly, the person must have a usual place of abode outside Australia and secondly the person must not have an intention to reside in Australia. Both of these must be satisfied in order for the 183 day test not to apply.

As stated in your private ruling application, you estimate that your presence in Australia will be no more than 100 days a [financial] year. Therefore, where your usual place of abode is outside Australia you will be considered to be a non-resident of Australia as you are not in Australia continuously or intermittently for more than one-half of an income year.

Commonwealth Superannuation Test

This test is not relevant in your situation as it only applies to persons eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

As you have never been a member of, nor had eligibility for membership of, a superannuation scheme established by deed under the Superannuation Act 1990, or and eligible employee for the purposes of the Superannuation Act 1976, this test is not relevant in your situation.

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