Edited version of private advice

Authorisation Number: 1012643785802

Ruling

Subject: residency status

Question

Are you an Australian resident for taxation purposes?

Answer

No.

This ruling applies for the following periods

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on

March 20XX

Relevant facts

You were born in and are a citizen of Australia.

You have not been granted permanent residency in any other country.

You departed Australia in 20XX to take up an employment contract overseas. Your spouse and children went with you.

You were living and working in Australia prior to your departure.

You have an employment contract for a fixed period of three years.

Your employer is responsible for obtaining the necessary visas and work permits for you to enter, reside and work in country A.

Your employer will make superannuation contributions on your behalf into a complying superannuation fund.

You and your spouse are entitled to return travel to Australia once a year.

Your employment contract provides you with an entitlement of two airfares to Australia per year. However these are not restricted to travel to Australia. You may choose any destination of equivalent value or it can be recouped as cash.

Upon entry in country A you were issued a visit pass.

You hold a country A two year employment pass. The employment pass is issued to you on the condition that you work as a professional with entity B in country A.

Your spouse holds a dependant pass. The dependant pass is issued to your spouse on the express condition that they do not undertake any form of employment in country A.

Your spouse can forfeit her/his current visa and obtain an employment visa. This may be considered when your youngest child is older.

Your children also each hold a dependant pass.

The renewal of your employment pass and your family's dependant passes will be completed by the HR department at your work. You are not required to leave country A provided the new passes are obtained prior to the old passes expiring.

In accordance with the terms of your employment contract, the employment and dependant passes were organised by your employer.

Your current employment contract ends in 20YY. You may negotiate to extend your employment in country A.

You do not have a return air ticket to Australia.

Since your departure, you have returned to Australia on two occasions, for a birthday party and for a holiday. These trips were for a few days each.

You do not expect to visit Australia more than four times a year if at all and the visits would be for family or close friend social events only.

You lived in short term rental accommodation upon arrival in country A, before obtaining a two year lease on a property.

Your assets in country A consist of a vehicle and bank accounts. You have obtained a country A driver's licence.

Your household effects were shipped to country A. You have opened all necessary household utility, internet, television and telephone accounts in country A.

You are in a regular social sport tournament in country A.

Your assets in Australia consist of your home, bank accounts, shares and superannuation.

Your income from Australian sources include interest and dividends.

Prior to departing Australia, you lived in the home that you owned.

Due to the strong rental market you decided to retain the property as an investment rental property. The property is managed by a commercial real estate agent. If you return to Australia you may live in another house and/or another state.

Your previous employment position in Australia no longer exists.

You do not have a job being held for you in Australia.

You have extended family and friends in Australia.

You also have extended family and friends in country A.

You have social connections in country A and your children attend a school in country A.

In 20XX you voted in the Australian federal election.

You have advised your Australian financial institutions and companies with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted.

You have suspended your Australian private health insurance.

You have not advised Medicare Australia to have your name, or your family's names, removed from their records.

Before leaving Australia you resigned from your sporting clubs, sold both family cars and some excess household items. You cancelled your Australian internet and household services. You have requested online delivery of your mail. Your Australian bank accounts are internet based and can be accessed globally.

You sold a number of shares before leaving Australia and you have no Australian credit cards or mobile phone.

You are a country A resident for country A taxation purposes. You are in the process of preparing your 20XX country A income tax return.

When completing the Australian immigration outgoing passenger card, you stated that you were an Australian resident departing permanently.

You are unsure whether you had an I1 capital gains tax event when you left Australia.

Neither you, nor your spouse, have ever been Commonwealth government employees.

You do not currently have any further trips to Australia planned, however, you may holiday in Australia in 20YY for a duration of less than two weeks.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

Residency status is a question of fact.

The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

Subsection 6(1) of the ITAA 1936 provides four tests to determine whether a person is a resident of Australia for income tax purposes. These tests are:

• the resides test;

• the domicile and permanent place of abode test;

• the 183 day test; and

• the Commonwealth superannuation fund 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 satisfy the conditions of one of the other three tests.

The resides test

The Macquarie Dictionary defines reside as to dwell permanently or for a considerable time, have ones abode for a time.

The Shorter Oxford English Dictionary defines reside as to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place.

As a general concept, residence includes two elements: physical presence and the intention to treat the place as home. The period of physical presence in Australia is not by itself decisive when determining whether an individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant in determining the residency status. No single factor is necessarily decisive. The following factors are useful when determining whether a person is residing in Australia:

• intention or purpose of presence,

• family and/or employment ties,

• maintenance and location of assets, and

• social and living arrangements.

Residence was discussed in Joachim v FCT 2002 ATC 2088. In that case it was highlighted that 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.

Recent case law decisions have considered the following factors are also relevant in determining whether a person is an Australian resident for taxation purposes:

• physical presence in Australia

• nationality

• history of residence and movements

• habits and mode of life

• frequency, regularity and duration of visits to Australia

• purpose of visits to or absences from Australia

• family and business ties to different countries and

• maintenance of place of abode.

In your case, you and your family relocated to country A in March 20XX. You have a three year employment contract which may be extended.

Although you have some financial and family ties in Australia, it is considered that you have not retained a continuity of association with Australia. Based on the factors listed above, we consider that you are not residing in Australia.

Consequently you do not satisfy the 'resides test' and therefore it is necessary to consider the other three tests.

The domicile test and permanent place of abode

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 has only one domicile at the one time. A person retains the domicile of origin unless and until they acquire a domicile of choice in another country. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile.

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, for example, 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.

In your case you were born in Australia and are a citizen here. Your domicile of origin is in Australia. Although you intend to work in country A for at least three years, you do not have a permanent or long term visa to stay there. It is not considered that your domicile is in country A.

As your domicile remains in Australia, you will be considered an Australian resident unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

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. The nature and quality of use which a taxpayer makes of a particular place of abode overseas is important (FC of T v Applegate 79 ATC 4307; (1979) 9 ATR 899).

The expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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.

Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia to live overseas ceases to be an Australian resident during the absence.

IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode:

• the intended and actual length of stay in the overseas country

• any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country

• the establishment of a home outside Australia

• the abandonment of any residence or place of abode in Australia

• the duration and continuity of presence in the overseas country, and

• the durability of association with a particular place in Australia.

As highlighted in paragraph 25 of IT 2650, as a broad rule of thumb, a period of about two years or more would generally be regarded as a substantial period for the purposes of a taxpayer's stay in another country. It must be stressed, however, that the duration of the taxpayer's actual or intended stay out of Australia is not, of itself, conclusive and needs to be considered with all of the factors.

In your case you intended to live and work in country A for at least three years. It is considered that your intention to live in country A and actions have shown you established a permanent place of abode outside Australia. This is supported by the following:

• you had a three year employment contract in country A,

• your family members went with you to country A,

• you have a two year lease on a property,

• you have social ties in country A.

Applying the facts of your situation to the above criteria, it is considered that you had permanent place of abode in country A from the date of departure in 20XX.

As a result, you would not be considered a resident of Australia for income tax purposes under the domicile test. 

The 183-day test

Under the 183 day test, a person is a resident of Australia if they have actually been in Australia, continuously, or intermittently, during more than one half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia.

In the 2012-13 income year, although you were in Australia for more than 183 days, the Commissioner is satisfied that your usual place of abode is in country A.. Therefore you are not a resident under this test from your date of departure in 20XX.

You will also not be in Australia for 183 days in the 20XX-YY to 2015-16 income years. Therefore you will not be a resident of Australia under this test.

The superannuation test

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

A person is a resident under this test if they are:

n a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

n an eligible employee for the purposes of the Superannuation Act 1976; or

n the spouse, or a child under 16, of a person covered by either of the above.

You and your spouse have not been employed by the Commonwealth government. You do not meet any of the other requirements of this test and you are not a resident under the superannuation test.

Summary

You do not satisfy any of the tests for Australian residency. Therefore you are not considered a resident of Australia for taxation purposes from your date of departure in 20XX.