Edited version of private advice

Authorisation Number: 1051813115506

Date of advice: 12 March 2021

Ruling

Subject: Residency and foreign source income

Question 1

Are you a resident of Australia for taxation purposes?

Answer

No

Question 2

Are the salary and wages you receive from the organisation assessable in Australia?

Answer

Not applicable.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 October 20XX

Relevant facts and circumstances

You were born in country A.

You are a citizen of Australia.

You departed for country B to take a position with an organisation.

The position is an ongoing position, your initial contract was a fixed term contract.

Your contract has been renewed after the first year, now your contract can be renewed every X years automatically.

You entered country B with a visa.

Your visa was supplied by your employer and can be renewed yearly.

You rent an apartment in country B.

Your apartment is in a long-term lease for your personal use only.

You have obtained a Drivers Licence in country B.

You have opened a bank account in country B and have acquired household effects.

You have joined a club for Australians in country B.

You stated you were departing Australia permanently on your outgoing passenger card.

You do not have a spouse.

You do not have any dependents.

You were renting in Australia prior to your departure.

You have bank accounts in Australia, you are planning to close bank accounts.

You have informed the bank that you were departing Australia.

You have cancelled your Australian private health insurance policy.

You do not have any investments in Australia.

You do not maintain any professional or occupational memberships in Australia.

You do not have any social or sporting connections with Australia.

You have informed the Australian Electoral Commission that you were departing Australia.

You have informed Medicare that you were departing Australia.

You are a member of a Commonwealth superannuation fund, however, you are not an eligible employee who can contribute to the Commonwealth superannuation fund.

You did not return to Australia for any period after departing for country B.

You intend to reside indefinitely outside of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1997 subsection 6-5(3)

Reasons for decision

Question 1

Summary

Based on the facts you have provided; you are not a resident of Australia for taxation purposes from the date you departed Australia.

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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', regarding 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.

The resides (ordinary concepts) 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 several factors identified which can assist in determining if a taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(i)            physical presence in Australia

(ii)           nationality

(iii)          history of residence and movements

(iv)          habits and "mode of life"

(v)           frequency, regularity and duration of visits to Australia

(vi)          purpose of visits to or absences from Australia

(vii)        family and business ties to different countries

(viii)       maintenance of place of abode

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia 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 your case, you are an Australian citizen, you departed for country B to take a position. The position is an ongoing position, your initial contract was a fixed term contract, your contract has been renewed after the first year, now your contract can be renewed every X years automatically.

You entered country B with a visa which was supplied by your employer and can be renewed every year. You rent an apartment which is a long-term lease for your personal use only. You intend to reside outside of Australia indefinitely.

You are not a resident of Australia for taxation purposes under this test.

The domicile (and permanent place of abode) test

Under this test, a person whose domicile is Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied that they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

In your case, your domicile of origin is country A, and your domicile changed to Australia due to your Australian citizenship. There is no evidence to suggest that you have established a new domicile in country B. Therefore, your domicile is Australia.

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.

In your case, you are based in country B; you have secured and established lasting accommodation facilities for yourself at premises which you consider your home. You do not have a permanent home available to you in Australia.

The Commissioner is satisfied that you set up a permanent place of abode outside Australia.

You are not a resident of Australia for taxation purposes under this test.

The 183-day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

In your case, you departed for country B and did not return to Australia for any period after the departure and you intend to reside outside of Australia indefinitely.

You are not a resident of Australia for taxation purposes under this test as you did not and will not be in Australia for 183 days after your departure.

Superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse currently contribute to certain superannuation funds for Commonwealth government employees.

You are a member of a Commonwealth superannuation fund; however, you are not an eligible employee who can contribute to the Commonwealth superannuation fund. Therefore, you are not a resident of Australia for taxation purposes under this test.

Conclusion

You are not a resident of Australia for taxation purposes from the date you departed Australia.

Question 2

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year.

As a foreign resident of Australia for taxation purposes, you are employed and perform all work outside of Australia. Only Australian source income is assessable in Australia.

Therefore the income from the organisation is not assessable in Australia.

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