Edited version of your written advice

Authorisation Number: 1012692821013

Ruling

Subject: Residency - leaving Australia

Question and answer:

Are you a resident of Australia for income tax purposes?

No.

This advice applies for the following period:

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

The scheme commenced on:

1 July 2014

Relevant facts

You were born in Australia and are an Australian citizen.

You have an ex-spouse and dependants that live in Australia.

You separated from your ex-spouse and later finalised divorce proceedings.

You have worked on various projects within and outside of Australia for a number of years, including work performed in overseas locations.

After separating from your spouse, you left Australia to live and work in country Y.

You arrived in country Y on a visa that is required to be renewed annually.

Since arriving in country Y you have found long term employment.

You intend to return to Australia infrequently for the purpose of visiting your family for short periods, during the years included in this ruling.

The income that you derive in country Y is subject to income tax by the country Y authorities.

A portion of your income is transferred to Australia to assist in your dependant's education endeavours.

You have no social or sporting ties in Australia.

Your social and sporting ties to country Y consist of various a gym and sporting club memberships. You have a country Y driver's licence and sailing and boat licence. You attend country Y festivals and events and are involved in a long term relationship with a country Y national whom you intend to marry.

You and your ex-spouse are not eligible members of a Commonwealth superannuation scheme.

You do not have any assets in Australia.

Your assets in country Y consist of a motor vehicle, bank accounts and household furnishings.

You are currently engaged in attaining the prerequisites required to obtain a country Y residents visa. These prerequisites include the ability to speak and write in the country Y language as well as knowledge of country Y Culture.

You intend to remain in country Y for an indefinite period.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6(1)

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

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).

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 intend to travel to Australia infrequently for short periods to visit your dependants and your parents.

Nationality

In recent cases, 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 were born in Australia and are an Australian citizen. You are in the process of obtaining a more permanent country Y residency status.

History of residence and movements

In recent cases the Tribunal noted that both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily resident (for taxation purposes) in a country in a particular income year.

You have lived and worked in country Y for a number of years. During this period you have spent various short periods in Australia visiting family.

(iv) Habits and "mode of life"

In recent cases 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.

You are employed in country Y and live in long term rental accommodation. You have developed a number of social and sporting ties in country Y and attend country Y festivals and events. In addition you are in a long term relationship with a country Y national whom you intend to marry.

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

You intend to travel to Australia infrequently for short periods.

(vi)  Purpose of visits to or absences from Australia

In recent cases the purpose of the taxpayer's visits to or absences from Australia were considered a factor when determining a taxpayer's residency status.

You live and work in country Y. The purpose of your visits to Australia is to visit your family.

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

Family

Although you have dependants in Australia, you are involved with a country Y national whom you intend to marry.

Business or economic

Your business and economic ties are situated in country Y.

Assets

The only assets that you own are located in country Y.

Maintenance of Place of abode

The only place of abode that you are maintaining is located in country Y.

Conclusion

In consideration of all of the factors outlined above, it is concluded that you are not a resident of Australia for income tax purposes under the 'resides test' for the years included in this ruling.

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, therefore your domicile of origin is Australia. From the information that you have provided you are yet to obtain country Y citizenship or a more permanent residency status in country Y. Therefore your Australian domicile will remain 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. 

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.

Based on the facts of your case, your pattern of behaviour is consistent with someone who has established a permanent place of abode outside of Australia. Significant in reaching this conclusion is that you have lived and worked in country Y for a substantial period of time and in the process have maintained a long term residence. In addition, since your arrival in country Y you have established a number of sporting and social ties and are in a long term relationship with a country Y national whom you intend to marry.

Although it has been determined that your Australian domicile has remained unchanged, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia. Therefore as you have a permanent place of abode outside of Australia, you are not a resident of Australia for income tax purposes under the 'domicile test' for the years included in this ruling.

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 will not be physical present in Australia for a period of greater than 183 days in any of the years included in this ruling. Therefore you will not be 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 ex-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 for the years included in this ruling.