Edited version of your written advice

Authorisation Number: 1012725668853

Ruling

Subject: Residency

Question and answer

Will you be a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

The scheme commenced on

1 July 2014

Relevant facts and circumstances

You are a citizen of Australia. Your country of origin is Australia.

You have been travelling to a foreign country for employment for several years.

You were appointed to the fulltime position, on the basis that you moved to a foreign country full time.

You departed Australia.

You have spent majority of your time in a foreign country, only returning to Australia to sort out your affairs to facilitate your move there. You intend living there full time for the foreseeable future.

You established a residence in a foreign country on a lease with the option to extend it. You are currently looking at property to rent on a long term basis; or to buy in a foreign country.

You also looking at obtaining a vehicle to rent or purchase in a foreign country.

You have a house in Australia which has been on the market for several months but you have had no serious offers. If it is not sold you may rent it out while you are in a foreign country. You also have a car and boat on the market.

Your spouse stayed in a foreign country and they will be spending the major part of remaining of the year in a foreign country, but it is uncertain beyond that.

You have children who are independent.

You have supplied copies of the employment offer letter and your rental agreement in a foreign country.

You have been granted residency in a foreign country with a visa which is valid to a date. Residency in a foreign country is automatically reviewed every few years. The residency application process was only begun and has taken several months to process. The working visa applications are sponsored by your overseas employer.

Prior to your departure you were living on a permanent basis in your family home.

You maintain a serviced apartment in a foreign country.

You formed the intention to make your home indefinitely outside Australia, when you were appointed to a full time position, as soon as current commitments (such as your children's education) permitted. You managed that role travelling. Since a date, you have been permanently based in a foreign country.

You have no immediate plans to return to Australia permanently.

You do you hold a return airline ticket.

You will return to Australia from time to time for family visits as required. You are also committed to fulfilling your obligations as a club.

You are living in a rented, serviced apartment currently contracted until a date, at which point your spouse and you will make a decision about whether to stay where you are or to relocate elsewhere. You have supplied a copy of the lease.

Your overseas employer provided you with accommodation as part of your employment contract.

Your assets in a foreign country are:

• an bank account

• household effects

• a bike and

• a new vehicle being purchased

Prior to leaving Australia you lived in a dwelling.

When in Australia you will stay with your adult children.

Your assets in Australia:

• a house

• some personal effects and

• bank accounts.

Your household effects in Australia have been placed in storage or are being used by your family.

You are not receiving income from Australian sources.

You do not have a position or job being held for you In Australia.

You have no social and sporting connections with Australia apart from you membership of a club.

Your social and sporting connections you will have with a foreign country will be membership of a club; which you are applying for.

Your spouse worked in the government system as an employee years ago.

You have not advised the Australian Electoral Office to have your name removed from the electoral roll.

You are in the process of advising Australian financial institutions with whom you hare investments that you have a foreign resident so that non-resident withholding tax can be deducted.

You have not advised Medicare and/or health insurance provider to have your name removed from their records; if necessary you can do so.

The residents of a foreign country are not required to lodge tax returns.

You stated as the reason for going overseas when completing the Australian Immigration Outgoing passenger card that you are an Australian resident departing permanently.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

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

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia 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.

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:

• the resides test

• the domicile test

• the 183 day test

• the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

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 meet the conditions of one of the other three tests.

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(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.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

(i) Physical presence in Australia

A person does not necessarily cease to be a resident because he or she is physically absent from Australia.

In relation to this the AAT has stated that:

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there 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.

You were appointed to the fulltime position, on the basis that you moved to a foreign country full time. You have spent majority of your time in a foreign country, only returning to Australia to sort out your affairs to facilitate your move there. You intend living there full time for the foreseeable future.

(ii) Nationality

The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case.

You were born in Australia and you are an Australian citizen.

(iii) History of residence and movements

You have been travelling to a foreign country for work purposes for several years.

You departed Australia to move to a foreign country to live and work for the foreseeable future.

You have only returned to Australia to sort out your affairs to facilitate your move there.

You established a residence in the foreign country and are looking to rent on a long term basis or to buy in the foreign country.

You have put your Australian home on the market.

(iv) Habits and "mode of life"

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.

You have lived and worked in a foreign country and will do so for the foreseeable future.

You have only returned to Australia to sort out your affairs to facilitate your move there.

You established a residence in a foreign country and are looking to rent on a long term basis or to buy in a foreign country.

Your home in Australia has been put on the market.

Your spouse will be spending the major part of remaining a year in a foreign country, but it is uncertain beyond that.

Your assets in the foreign country are:

• an bank account

• household effects

• a bike and

• a new vehicle being purchased

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

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during period of two years and seven months to be residing in Australia.

You have spent majority of your time in a foreign country, only returning to Australia to sort out your affairs to facilitate your move there.

You will return to Australia from time to time for family visits.

You have obligations as a club in Australia.

(vi) Purpose of visits to or absences from Australia

You will return to Australia from time to time for family visits.

You may make trips back in connection your obligations as a club member.

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

Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident.

Family

You have family in Australia.

Your spouse will be spending the major part of a year in a foreign country, but it is uncertain beyond that.

Business or economic

In a foreign country:

• you work full time in a foreign country

• a bank account.

In Australia:

• a house, a car and boat which you a trying to sell

• bank accounts

Assets

In a foreign country:

• a bank account

• household effects

• a bike and

• a new vehicle being purchased

In Australia:

• a house, a car and boat which you a trying to sell

• some personal effects and

• bank accounts.

(viii) Maintenance of Place of abode

The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer.

You live in rented accommodation in a foreign country.

You own a house which you are trying to sell.

Summary

As stated above it is important that no one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you have ceased to be a resident of Australia. Specifically:

• you have lived and worked in a foreign country and will do indefinitely

• your spouse will be spending of the rest of the year in the foreign country with you and perhaps beyond

• you live in a rented apartment in a foreign country with some of your personal effects

• you are trying to sell your family home in Australia

• you have opened a bank account there

Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts as you will not maintain a continuity of association with Australia for the relevant period.

The domicile and permanent place of abode 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

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

As you are still an Australian citizen while living in a foreign country, your domicile is Australia and remains unchanged.

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.

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.

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.

It is your intention to live and work in a foreign country on an ongoing basis. You have no plans to return to Australia to live, only to visit. Your employment is for an indefinite duration. You live in rented accommodation which is currently on a short term lease but you intend either renting on a long term basis to else buying a dwelling.

The Commissioner is satisfied you have established a permanent place of abode outside of Australia.

Therefore, you will not be a resident of Australia under the 'domicile and permanent place of abode' test of residency.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, that is 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

You will not been present in Australia for a total period of more than half of a year of income.

Therefore you will not be a resident of Australia 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. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

Neither you nor your spouse is a member of the PSS or CSS, nor are you eligible to contribute to either of them. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation 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.