Edited version of your written advice

Authorisation Number: 1051377429181

Date of advice: 31 May 2018

Ruling

Subject: Residency – departing Australia

Question

Are you a resident of Australia for tax purposes?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2017

Year ending 30 June 2018

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You are an Australian citizen

You accepted a 12 month position at company X in country A.

You departed Australia in late 2016.

You returned to Australia 14 days later.

You departed Australia again in early 2017 to commence your new role in country A.

Your contract was for 12 months and you then intended to extend this.

Your spouse departed Australia in mid-2017.

You were granted a temporary work visa in early 2017 which is valid for 2 years for country A.

You are now working for company Y in country A.

Your current contract is for 2 years.

You were a guest in an executive furnished serviced apartment from early 2017 to early 2018 at a hotel.

Your current accommodation is an executive furnished serviced apartment at a different hotel.

Your lease agreement is for 365 days.

The hotel provides services such as:

● Housekeeping 3 times per week

● Maintenance services

● 1 Parking spot

● Complimentary use of pool and health club of the hotel

● Television with satellite channels

● In-room complimentary Wi-Fi

● In-room electricity and water consumption

● Concierge and security services

● A discount on food and beverages at the hotel outlets as an in house guest

● Further discount on hotel services such as spa and laundry services

You have rented a vehicle from a hire car company.

You own a residential property in Australia which you purchased in the late 1990’s and lived in prior to your departure.

Your house in Australia has not been rented out.

You brought only your personal effects such as clothing and personal baggage with you to country A.

Your furniture and remaining belongings remain stored at your house in Australia.

You own 2 vehicles in Australia which are being stored at your property.

You have not advised your insurance company that the house is unoccupied.

You suspended your Australian private health insurance in early 2017.

Your spouse suspended their Australian private health insurance in early 2017.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1936 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.

Section 995-1 of the ITAA 1997 defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

● the resides test,

● the domicile (and permanent place of abode) test,

● the 183 day test, and

● the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

Relevant to your situation are the first two tests which are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia. In examining these tests, IT 2650 provides a number of factors which assist in assessing a taxpayer's situation against the tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. The totality of the taxpayer's factual circumstances needs to be taken into account in arriving at a decision.

In deciding cases of residency, the courts and tribunals have noted that a person does not necessarily cease to be a resident because he or she is physically absent from a place. Instead, the test is whether the person has retained a continuity of association with a place, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation [2002] ATC 2088).

As you are not currently present in Australia you are not considered to be residing in Australia according to ordinary concepts.

The domicile test

The domicile test is the first statutory test. You are an Australian resident if your domicile is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

Domicile

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

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 this regard paragraph 21 of IT 2650 states that:

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

In your case you are an Australian citizen by birth and you have not adopted a new domicile of choice as you have not obtained a migration visa in country A, therefore your domicile is Australia.

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 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.

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.

The Commissioner's view on what constitutes a permanent place of abode is contained in Taxation Ruling IT 2650 Income tax: residency – permanent place of abode outside Australia.

Paragraph 23 of IT 2650 sets out some of the factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

(a) the intended and actual length of the taxpayer's stay in the overseas country;

(b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

(c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

(d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(e) the duration and continuity of the taxpayer's presence in the overseas country; and

(f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive. Applegate seems to indicate, however, that greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

While you are staying in country A, you are maintaining an association with Australia through your property which is more significant as:

● You are on a 2 year work visa,

● You have a contract in country A for 2 years ending early 2020,

● You have not set up a permanent place of abode but have instead found accommodation in a furnished, serviced apartment in a hotel in country A,

● The hotel you are staying in provide you with the same services as any other guest staying there including housekeeping and room service,

● You do not pay for any utilities outside the monthly rate for your serviced apartment,

● You have not brought any personal belongings other than clothes and personal baggage with you to country A,

● You hire a vehicle on a monthly basis,

● Your spouse has joined you in Country A,

● You have not abandoned your house and therefore maintain a place of abode in Australia,

● Your personal belongings including furniture and vehicles have remained at your property in Australia, and

● You have not informed your insurance company of your departure.

Based on these facts, it is therefore considered that you have not established a permanent place of abode outside of Australia. Therefore, you are considered to be an Australian resident under the domicile test.

The 183 day test

When 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 do not satisfy this test as you have not spent more than 183 days in Australia during the income year.

The Superannuation test

An individual is still considered to be a resident if that person is 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.

You are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not treated as a resident under this test.

Your resident status

As you have not set up a permanent place of abode outside of Australia and therefore meet the domicile test, you will remain a resident of Australia for tax purposes while you are working in country A.

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).