Edited version of your private ruling

Authorisation Number: 1012580044759

Ruling

Subject: Residency and foreign sourced income

Questions and answers:

1. Are you a resident of Australia for income tax purposes?

No.

2. Is the salary that you derive overseas assessable in Australia?

No.

This ruling applies for the following period:

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commences on:

1 July 2012

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a citizen of Australia and your spouse and child are citizens of country S.

Your country of origin is Australia and your spouse and dependant's country of origin is country S.

You left Australia to live and work overseas with your spouse.

You entered country T on a country T residency permit.

Your country T residency permit is required to be renewed after a number of years. You are able to remain in country T as long as your spouse is employed. Your spouse has permanent employment.

Your spouse does not require a visa as they are a country S citizen.

While living in country T your spouse gave birth to your dependant.

You are working under an employment contract with an employer in country S.

Your employment contract with your foreign employer is for a number of years.

Your foreign sourced income is assessable in country S.

You decided that you wished to live permanently overseas prior to your departure.

Since you first departed Australia you have returned for short periods on a number of occasions.

You and your family rent a flat in country T.

Your assets in country T consist of household items, bank accounts and other everyday items.

Your assets in Australia consist of bank accounts and some shares.

You derive interest income from your Australian bank accounts and dividends from your Australian shares.

Prior to your departure you were renting an apartment in Australia.

Your sporting or social ties that you have in Australia consist of your family and friends.

Your sporting or social ties that you have overseas consist of your spouse's family and a network of friends.

You do not have any employment position being held for you in Australia.

You have informed the Australian Electoral Office that you are living abroad and have applied for postal votes in the previous Australian elections.

You have advised your bank as well as companies that you are a shareholder of that you are a non-resident for tax purposes. You were able to do so due to you being considered a non-resident in a previous private ruling that was issued.

At the conclusion of your contract you intend to seek further employment opportunities abroad.

You expect this pattern to continue for the years included in this ruling.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Further issues for you to consider

Nil

Anti-avoidance rules

Nil

Reasons for decision

Residency

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

· the superannuation test.

The first two tests are examined in detail in TAXATION RULING NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia.

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 a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests.

The resides test

In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; (2002) 51 ATR 1173 at paragraph 43-44, it was determined that the word 'resides' should be given the widest meaning.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia, identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes.

According to paragraph 20 of TR 98/17 factors to be considered in determining residency in Australia are:

· intention or purpose of presence;

· family and business/employment ties;

· maintenance and location of assets; and

· social and living arrangements.

Paragraph 21 of TR 98/17 further states that:

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Recent case law decisions have expanded on the list of factors identified in TR 98/17.  Case 5/2013 and Sneddon v FC of T (Sneddons Case), for example, considered the following factors in relation to whether the taxpayer resided in Australia:

(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.  

Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1).

(i) Physical presence in Australia

A person does not necessarily cease to be a resident of a particular place just because he or she is physically absent. The test is whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation 2002 ATC 2088, at 2090).

In your case, you left Australia to live and work overseas. Since your departure from Australia you have returned to Australia for limited periods for both work and personal reasons.

Therefore, it is considered that this limited presence will be sufficient to demonstrate that you are not maintaining an ongoing continuity of association with Australia for the years included in this ruling.

(ii) Nationality

In Iyengar's Case, it was noted that in most cases, the nationality of a person would not be a factor to be taken into account along with other circumstances in determining where his or her residence is. However, in cases that could go either way, the citizenship of a person may not be completely irrelevant in the conclusion to be drawn from all the relevant facts

In your case, you are an Australian citizen. While living in country T you have a country T residency visa that is required to be renewed after a number of years.

(iii) History of residence and movements

You were born in Australia where you have lived until you and your spouse decided that you wanted to live in permanently in abroad. You have been living in country T since departing Australia and intend to remain there indefinitely with your family.

In light of the above and consistent with the principles established in recent case law, your history of residence and movements are consistent with someone who is no longer residing in Australia.

(iv) Habits and "mode of life"

In recent case law a taxpayer's habits and mode of life in the country where they are/had been living were considered when determining whether a taxpayer continued to be a residence of Australia for income tax purposes.

When you arrived in country T you were required to find accommodations suitable for you and your family. You are not subsidised by your employer for your accommodation expenses. The remuneration that you receive from your foreign employment has remained overseas. Since your arrival in country T you have established a network of local friends that you regularly socialise with in both country T and country S. Significantly your spouse has family in both country T and country S.

In considering the above, your habits and mode of life are consistent with someone who has ceased to be a resident of Australia for tax purposes for the years contained in this ruling.

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

Since first departing Australia in late May 20XX you have returned to Australia for short periods for both employment and personal reasons.

In light of the above, the pattern of frequency, regularity and duration of your visits to Australia are considered sufficient to preclude you from being considered a resident of Australia for taxation purposes post your departure from Australia.

(vi)  Purpose of visits to or absences from Australia

In considering the purpose of your absence from Australia, you and your spouse decided that you wanted to live and work overseas indefinitely. Since your departure you have returned to Australia for short periods.

In light of the above, your actions are sufficient to preclude you from being considered a resident of Australia for taxation purposes in each of the income years included in this ruling.

(vii) Family, assets, business ties to Australia and the overseas country or countries

In your case, you left Australia to live overseas for an indefinite period.

While living in country T you have been accompanied by your spouse and dependant whom are both country S citizens. Your overseas assets consist of furnishings, bank accounts and other smaller items. You are employed by a foreign employer. Your assets in Australia consist of a bank account and some shares.

Therefore, on the balance and based on the above, your family, assets and business ties to country T preclude you from being considered a resident of Australia for income tax purposes.

(viii) Maintenance of Place of abode

In your case, you do not own or rent a home in Australia. While in country T you and your family live in long term rental accommodation.

In light of the above it is considered you not are maintaining a place of abode in Australia. Not maintaining a place of abode in Australia is consistent with someone who has ceased to be a resident of Australia for income tax purposes.

Conclusion

In consideration of all of the factors outlined above, it is concluded that you will not be a resident of Australia for income tax purposes under the 'resides test'.

The domicile 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.

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 prove an intention to make his or her home indefinitely in that country. In your case you were born in Australia and therefore your domicile of origin is Australia. From the information you have provided you have a country T residency permit that is required to be renewed after a number of years. and you have not indicated an intention to gain country T citizenship. Therefore your Australian domicile remains unchanged.

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 you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

Paragraph 23 of IT 2650 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:

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

b) 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;

c) 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;

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 taxpayer's presence in the overseas country; and

f) 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.

Your circumstances are as follows:

· you and your spouse left Australia to live and work in country T;

· while in country T you have secured full time employment and live in long term rental accommodation;

· since departing Australia you have returned for short periods;

· you do not have a place of abode in Australia;

· you have a country T residency visa that is required to be renewed after a number of years;

· your assets in Australia consist of bank accounts and some shares;

· you have informed the Australian Electoral Office, Australian banks and companies that you are a non-resident for income tax purposes; and

· your spouse gave birth to your dependant whilst you were living abroad.

Based on these facts and the greater weight applied against factors (c), (e) and (f), your pattern of behaviour is consistent with someone who has established a permanent place of abode outside of Australia.

Accordingly, although your Australian domicile remains unchanged the Commissioner is satisfied that you have established a permanent place of abode outside of Australia, therefore you are not a resident of Australia for income tax purposes under the 'domicile test'.

Therefore based on the above, the Commissioner is satisfied that you are not a resident of Australia under the 'domicile test'.

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 does not intend to take up residence in Australia.

You do not intend to be in Australia for a period greater than 183 days in any of the income years included in this ruling. Therefore you are not a resident of Australia for income tax purposes under the 183 day test.

The Superannuation test

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

Neither you nor your spouse has ever been a member of a CSS or PSS.

Accordingly, you are not a resident under this test.

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 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.

Assessability of foreign sourced income

Subsection 6-5 of the ITAA 1997 provides that where you are an Australian resident 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 under subsection 6-5(3) of the ITAA 1997.

In your case, you are a foreign resident for income tax purposes therefore any salary or wages that you derive from your overseas employer is not assessable in Australia.

Accordingly, the salary and wages that you receive from your foreign employer is not assessable in Australia under subsection 6-5(3) of the ITAA 1997.