Edited version of private advice

Authorisation Number: 1051563162717

Date of advice: 12 August 2019

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes from when you departed Australia?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2018

Year ended 30 June 2019

Year ending 30 June 2020

The scheme commenced on:

1 July 2017

Relevant facts and circumstances

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

You left Australia without your spouse, who remains in the family home in Australia. Your contract with your employer is "unaccompanied" so your spouse was unable to accompany you overseas.

Your intention upon departure was to make a career and a life in Country A. You wished to establish yourself there and remain indefinitely.

You hold an employment visa which allows you to remain working there for two years. The visa is sponsored by your employer. You intend to apply for another visa when this one expires so that you may live in Country A indefinitely.

Your employment contract is a full-time open ended contract which allows you to work indefinitely.

You have rented an unfurnished apartment locally and have a two year lease. You have furnished this apartment locally and have also purchased a vehicle for your personal use. This vehicle is financed by a personal loan with a local bank.

You also established a local bank account with an attached credit and debit card. You also retain your two Australian bank accounts.

Before leaving Australia you advised the Australian Electoral Office of your departure and advised your bank that you would be overseas. However, you did not advise Medicare or your Australian health fund as this fund provides health cover for your child.

You had no household effects when you departed Australia as these were owned by your spouse who owns the house which is the family home.

You joined a local gym in Country A and have obtained a local driver's license. You have arranged local health insurance.

You intend to return to Australia once or twice per year, to see family and friends. You expect such visits to be for two weeks or less.

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 left Australia with the intention of living and working overseas indefinitely.

Based on the information provided, you have not been residing in Australia since you first left Australia and are, therefore, 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 has remained in Australia as you have not applied for permanent residency in another country.

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 have established a permanent place of abode outside Australia. Therefore, you are not a resident for tax purposes under this test.

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 are not a resident for tax purposes 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 resident for tax purposes under this test.

Residency status

As you did not satisfy any of the four tests of residency, you have not been a resident of Australia for income tax purposes since departing Australia.

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