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Edited version of your written advice

Authorisation Number: 1051296600024

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You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.

Date of advice: 19 October 2017

Ruling

Subject: International Residency

Question 1

Will I continue to be a resident of Australia under section 6(1) of the ITAA 1936?

Answer 1

Yes

Question 2

Will I be deemed to be solely a resident of Australia under Article X of the Australia – Country A Double Tax Agreement (DTA) for the period?

Answer 2

Yes

Question 3

Will our superannuation remain an “Australian Superannuation Fund” as defined in section 295-95(2) of the ITAA 1997?

Answer 3

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

XX 2018

Relevant facts and circumstances

You and your spouse are Australian citizens. You have accepted an offer of employment from an overseas company and intend to take up this new role in 2018. Your spouse intends to travel and live with you while you accept this new role. This employment is expected to last 2 years but may be extended by up to another year.

Neither you, nor your spouse, has ever been employees of the Commonwealth Government and hence neither are members of any government superannuation scheme.

You are married and have family who will remain in Australia while you are overseas. You will allow these family members to occupy your family home in Australia where you will store your personal effects including car, furniture, pets and personal belongings. You will also use this home as a base when you return to Australia during your overseas employment.

You intend to lease a house in Country A to act as temporary accommodation during your secondment. You intend to purchase household furnishing to furnish this rented house but will leave the majority of your personal assets in Australia, stored at your family home.

You and your spouse are members of a SMSF. This fund has a trustee company which is incorporated in Australia. You and your spouse wish to continue to contribute to this SMSF during the secondment.

You own X investment properties which you will retain and continue to lease while away from Australia. Your spouse owns a unit which will be leased on a long term basis during your overseas employment.

You and your spouse will retain your investments, Australian bank accounts, Medicare cards, membership of a local health fund and Australian driver’s licenses. You will also remain listed on the Electoral Roll.

Whilst you and your spouse will return to Australia during your secondment, you anticipate that neither will be in Australia for more than 183 days in any one income year.

You will open a local bank account in Country A.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Subsection 295-95(2)

Income Tax Assessment Act 1936 Subsection 6(1)

Double Tax Agreement between Australia and Country A

Superannuation Industry (Supervision) Act 1993 Section 42A

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 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:

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.

In Landy v FC of T 2016 ATC 10-435;[2016] AATA 754, the taxpayer took on a supervisory role at an oilfield in Oman that lasted 21 months. On or before departure, he cancelled his Medicare, notified his private health insurance fund, requested his name be removed from the electoral roll and completed an outgoing passenger card indicating that he was leaving Australia permanently. However, throughout his employment in Oman he financially supported his spouse in Australia, garaged his two motor vehicles at her home, maintained a joint bank account with his spouse, maintained his offices as director and secretary of an Australian company (his spouse being the other director and shareholder) and resumed living with his spouse on his return. The AAT found that the taxpayer's lack of severance of connections with Australia, and the lack of establishment of enduring and lasting living ties with Oman, required a conclusion that the taxpayer had not ceased to be a resident of Australia as ordinarily understood.

In your case, you are a citizen of Australia who intends to maintain your domicile in Australia. You will take all steps possible to establish a temporary residence in Country A and intend to return to Australia at the conclusion of your employment.

While it is clear that you will not reside in Australia it could be argued that you will remain a resident for taxation purposes as you will maintain a large number of associations with Australia while employed overseas.

We will now also include a discussion of the ‘domicile and permanent place of abode’ test as an alternative argument.

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.

You are a citizen of Australia who intends to establish a temporary home in Country A.

It is considered that you have not abandoned your domicile in Australia and acquired a domicile of choice overseas.

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:

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.

Based on all the facts, it is considered that, on balance, your behaviour is consistent with not residing in Australia but being considered a resident for tax purposes under the domicile test as the Commissioner is not satisfied that you intend to establish a permanent place of abode outside Australia.

The 183 days 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.

In your circumstances your travel to Australia is limited to relatively brief visits. Accordingly, you will not be treated as 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 Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

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.

Residency status

As you satisfy two of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a resident of Australia for income tax purposes from when you departed Australia.

Reasons for decision – Article X of Double Tax Agreement

As the applicant will be considered to be a resident of Country A under its domestic tax code, the tie breaker test in article X of the Double Tax Agreement (DTA) will also need to be considered in order to establish the applicant’s residency position in Australia.

You will maintain a number of links and associations with Australia including medical, housing, electoral, family and investment. You will also retain Australian citizenship which can be used as a test to finalise the question of personal and economic relations.

Accordingly, under this tie break test you will be considered to be solely a tax resident of Australia under article X of the double tax agreement.

Reasons for decision – SMSF

In order for the SMSF to remain a complying superannuation fund the conditions in section 42A of the Superannuation Industry (Supervision) Act 1993 must be met i.e. the SMSF must be an “Australian Superannuation Fund”.

An “Australian Superannuation Fund” is defined in section 295-95(2) of the ITAAS 1997 as –

(2) A superannuation fund is an Australian superannuation fund at a time, and for the income year in which that time occurs, if:

The trustee of this SMSF is an Australian resident as the trustee was incorporated in Australia.

The central management and control will be exercised by you and your spouse who remain residents of Australia. Hence this condition will also be met.

The sum of the amounts that would be payable to active members is also attributable to active members who remain Australian residents.

Accordingly, the SMSF will remain an Australian Superannuation Fund as defined in section 295-95(2) of ITAA 1997.

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