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Ruling

Subject: Residency

Question and answer

Are you a non resident of Australia from the date you left Australia to work overseas?

Yes

This ruling applies for the following period

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2010

Relevant facts

Your country of origin is Australia and you are an Australian citizen.

You left Australia to move to Country X for work. You accepted a work contract.

The purpose of your move to Country X is to work and earn a salary that is not taxed.

Your spouse and dependant child left Australia some months later to move to Country X with you.

Your employment is permanent and your contract is reviewed annually.

You return to Australia once a year for a visit.

You do not intend to return to Australia to live in the near future as you are living permanently in Country X.

You have permanent residency to live and work in Country X.

You, your spouse and child live in a fully furnished villa in a compound arrangement which is provided by your employer.

You are provided with a company car.

Other than working you use the gym at the accommodation site where you live in Country X and are a member of the Australian business group in Country X where expatriates meet on a monthly basis.

You have had your house in Australia up for sale for more than a year and have nearly sold it.

You still have an Australian bank account which your mortgage is attached to. You transfer money from your bank account in Country X to pay into your mortgage in Australia.

Neither you nor your spouse are Commonwealth Government of Australia employees.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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. 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.

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.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd 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'.

You left Australia with your spouse and child to start a new permanent job in Country X on a X year employment contract. You will be living and working there for an indefinite period of time. Accordingly you will not be residing in Australia.

As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Australia because your country of origin is Australia and you are still an Australian citizen.

Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia.

Permanent place of abode

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 courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

· the intended and actual length of the taxpayer's stay in the overseas country;

· 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;

· 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;

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

· the duration and continuity of the taxpayer's presence in the overseas country; and

· 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… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

It is considered that your permanent place of abode is in Country X because:

· You started a permanent X year work contract in Country X

· Your spouse and child are living with you in Country X

· You only return to Australia for a short visit on a yearly basis

· You live in a fully furnished villa in Country X which is provided by your employer. You have been living there since arriving

· Your house in Australia has been left vacant since you left Australia and has been up for sale for more than a year

· You have no intention to return to Australia to live in the near future

The 183 day 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 nodes not intend to take up residence in Australia.

As you will not be present in Australia for more than one-half of the income year you will not be a resident under the 183 day test.

The superannuation test

An individual is still considered to be a resident of Australia if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) of the Commonwealth Service 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.

As you do not meet the above conditions you are not a resident under this test.

Conclusion

As you do not meet any of the above tests, you are not a resident of Australia for tax purposes. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.

From the date you become a foreign resident any interest and dividend income will be subject to foreign resident withholding tax. If you receive any dividend income and maintain any bank accounts in Australia you should provide the relevant financial institutions with your overseas address.