Edited version of private advice

Authorisation Number: 1051554726083

Date of advice: 31 July 2019

Ruling

Subject: Residency

Question

Were you a resident of Australia for income tax purposes during your time overseas?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 2015

Relevant facts and circumstances

You are an Australian citizen with no other citizenships who left Australia in Autumn 20XX to take up employment in Country A.

You left Australia with your defacto partner.

Your intention upon departure was to reside with your partner in Country A indefinitely or at least until permanent residency was granted; an expected period of X years. After permanent residency was granted you intended to make a decision on whether to live in Country A or return to Australia.

You held a young person's mobility visa; which provides for up to up to 24 months of employment in Country A. This visa was for X years, as was your employment contract; however, there were discussions concerning the possibility that the company would sponsor you to stay working for a longer period. The project you were working on was scheduled to end in mid-20XX; however, your employer discussed the possibility of switching you to another project at that time.

You lived with your partner at three different locations- a shared apartment and two different flats. The last flat was rented in your name with a X year lease. You furnished these flats by buying items locally including utensils, pots, pans, TV, bedside tables, paintings, art, rugs and blankets.

You also established a local bank account and also joined a local health service. You made contributions to the health service to fund your membership. You lodged local tax returns through an automatic process.

Before leaving Australia you cancelled your health fund membership, gym membership, and sold all furniture as well as your car and motorbike. You retained a bank account but did not advise the bank that you would be overseas as you were unaware of the requirement to do so. This account received some share dividends while you were overseas.

You left your personal effects with your parents who agreed to hold these items until you had settled in Country A.

In Country A you joined a soccer club and remained a member for over a year.

You did not return to Australia during your time overseas.

You chose to take twelve months leave-without-pay from your employment in Australia at the suggestion of your manager who pointed out that by doing so, you would qualify for a bonus and it would assist with his KPI's. At the conclusion of this leave you left this position.

Due to the breakdown of your relationship, you returned to Australia in Spring 20XX after living in Country A for 1 year and 6 months.

You have never been employed by the Australian Commonwealth government and do not belong to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(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.

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

When considering the resides test the following factors are normally considered:

·         physical presence

·         intention or purpose

·         family or business ties

·         maintenance and location of assets

·         social and living arrangements

In your case, you are a citizen of Australia who departed Australia with your defacto partner with the intention of residing overseas on an "open-ended plan" with a possibility to stay overseas indefinitely. You did not return to Australia while you were overseas and you established a place of abode in Country A. Based on the information provided, you were not residing in Australia during the relevant period and were not a resident for tax purposes under the resides 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, for example, by obtaining a migration visa.

In your case, your domicile remained in Australia during the relevant period as you did not apply for permanent residency in Country A.

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.

Based on the information provided, the Commissioner is satisfied you established a permanent place of abode outside Australia. Therefore, you were not a resident for tax purposes under this test during the relevant period.

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.

You were not a resident for tax purposes under this test during the relevant period.

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 were not a resident for tax purposes under this test during the relevant period.

Residency status

As you did not satisfy any of the four tests of residency, you were not a resident of Australia for income tax purposes during the relevant period.

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