Edited version of private ruling

Authorisation Number: 1011800140100

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Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes from when you departed Australia to live in Country A?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are an Australian citizen and your country of origin is Australia.

You are a professional sportsperson and you began your career in the 20XX financial year.

You were based in Australia during the 20XX and 20YY income years and spent a significant amount of time travelling overseas to take part in sporting tournaments. However, you would return to Australia between these overseas tournaments.

You left Australia sometime in 20ZZ to live in Country A in order to play on a regional tournament.

Upon leaving Australia, you started leasing a unit in Country A to live in.

This unit is available to you at all times even when you are away from Country A on your tournaments.

You are now looking to purchase a residence in Country A.

For the 2010 and 2010 income years, your schedule shows that you travelled extensively to many countries to play in overseas tournaments.

You intend to remain in Country A from two to three years after which you intend to move to Country B permanently and to compete on a Country B tournament.

You have a "Sports Visa" which allows you to live in Country A.

Before leaving Australia, you closed your Australian bank accounts transferred all funds to Country A where you have opened a bank account.

You hold as an investment a vacant block of land in Australia.

Besides the vacant block of land, you do not own other property in Australia.

You lived with you parents in Australia before you left.

Your immediate family resides in Australia but have stated that otherwise, you have little social connections in Australia.

Your partner lives with you in Country A and also accompanies you on your overseas tournaments.

In Country A, you socialise with other professional sportspersons who also play your sport.

You return to Australia three times a year to see your Australian coach and your family.

You and your partner were not and are not Commonwealth Government of Australia employees.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1) and

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

Reasons for decision

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:

1. The resides test (residence according to ordinary concepts)

2. The domicile and permanent place of abode test

3. The 183 day test

4. 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Taxation Ruling IT 2650 provides guidelines for determining whether individuals who leave Australia to live overseas cease to be Australian residents for income tax purposes during their overseas stay.

1. The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

As you are residing outside of Australia, you are not considered to be residing in Australia for the purposes of the resides test.

2. The domicile and permanent place of abode test

If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

IT 2650 in paragraph 8 states that a person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country or until he or she acquires another domicile by operation of law.

IT 2650 in paragraph 21 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 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 two years, would not be sufficient evidence of an intention to acquire a new domicile of choice."

You are an Australian citizen and your country of origin is Australia. Thus, your domicile of origin is Australia.

You have a "Sports Visa" which allows you to live in Country A.

Applying IT 2650 to your circumstances, your sports visa is not sufficient evidence of an intention to acquire a new domicile of choice in Country A. Therefore, you are considered to have maintained your Australian domicile.

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.

IT 2650 states in paragraph 14 that 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 2650 states in paragraph 23 that 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. Some of these factors which have been considered relevant 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 establishment of a home 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 individual's presence in the overseas country; and

f) the durability of association that the individual has with a particular place in Australia.

IT 2650 states in paragraph 24 that the weight of each factor will vary with the individual circumstances and no single factor is decisive. However, "greater weight should be given to factors c) the establishment of a home outside Australia, e) the duration and continuity of the individual's presence in the overseas country, and f) the durability of association that the individual has with a particular place in Australia than to the remaining factors".

In relation to factor a) the intended and actual length of the individual's stay in the overseas country, IT 2650 states in paragraph 25 that "a period of about two years or more would generally be regarded by [the ATO] as a substantial period…however…[this] is not conclusive and needs to be considered with all of the factors in paragraph 23 above." IT 2650 further states in paragraph 26 "if, however, an individual with a usual place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another…any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or a permanent place of abode outside Australia."

In relation to factor c) the establishment a home outside Australia, IT 2650 states in paragraph 28 that "the fact that an individual has established his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent".

In relation to factor f) durability of association with a particular place in Australia, IT 2650 states in paragraph 29 that "if a taxpayer closes all bank accounts in Australia and transfers all funds (including investment funds) to accounts in the overseas country, this would indicate less durability of association with a place in Australia than if all accounts in Australia were maintained".

Intended length of stay and continuity of presence in Country A

You intend to remain in Country A from two to three years. However, you will travel extensively to many countries to play in overseas tournaments during the 2010 and 2011 income years.

Applying IT 2650 to your circumstances, it follows that the intended length of your stay in Country A would be substantial because you intend to live there for two to three years.

However, as you move from one country to another due to your career, your association with Country A would be considered purely temporary or transitory unless you show that you have a fixed or habitual place of abode in Country A.

Intention to travel to another country

You intend to move to Country B permanently after your stay in Country A and to compete on a Country B tournament. Thus, you do not intend to return to Australia at some definite point in time.

Establishment of a home outside Australia

You lease a unit in Country A and are now looking to purchase a residence in Country A.

This unit is available to you at all times even when you are away from Country A on your tournaments.

Your partner lives with you in Country A and accompanies you on your overseas tournaments.

Thus, you have established a home outside Australia in Country A because you have a permanent place to live in Country A and you live with your partner. This also means that since you have a fixed place of abode, despite the fact that you move from one country to another, your association with Country A is not considered purely temporary or transitory.

Whether any place of residence exists in Australia

You lived with you parents in Australia before you left. You hold as an investment a vacant block of land in Australia but besides the vacant block of land, you do not own other property in Australia.

You do not have a place of residence in Australia because you do not have a permanent place to live in Australia.

Durability of association with a particular place in Australia

Before leaving Australia, you closed your Australian bank accounts and transferred all funds to Country A where you have opened a new bank account.

Your immediate family resides in Australia but have stated that otherwise, you have little social connections in Australia. You return to Australia a number of times a year to see your family.

In Country A, you socialise with other professional sportspersons who also play your sport.

Thus, you have less durability of association with a particular place in Australia because you have closed your Australian bank accounts and transferred all funds to Country A and have stronger social connections with Country A as compared to Australia.

Weight of all factors

Weighing all the factors above in light of your individual circumstances, it is considered that you have established a permanent place of abode outside of Australia in Country A. 

As the Commissioner is satisfied that you have a permanent place of abode outside of Australia, you are not a resident of Australia for income tax purposes under this test.

3. The 183-day test

Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that your usual place of abode is outside Australia and you have no intention to take up residence here.

You have not been present in Australia for more than 183 days continuously or intermittently during the income year ending 30 June 2010.  Therefore, you are not a resident under this test.

4. 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. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

An individual's "spouse" is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to include another individual who although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple.

Your partner lives with you in Country A and also accompanies you on your overseas tournaments. Thus, your partner is considered to be your spouse pursuant to subsection 995-1(1) of the ITAA 1997.

You and your partner were not and are not Commonwealth Government of Australia employees.

Therefore, this test does not apply to you as you and your spouse were not employees of the Commonwealth Government of Australia.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not an Australia resident for income tax purposes since you left Australia.

Note:

As a part year resident, you are only eligible for part of the tax-free threshold pertaining to the number of months you were a resident for the income year ended 30 June 2010.