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Edited version of your written advice
Authorisation Number: 1012727031538
Ruling
Subject: Residency and leaving Australia
Questions and answers
Are you a resident of Australia for taxation purposes?
No
This ruling applies for the following period
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts
You are a citizen of Australia.
Your country of origin is Australia.
You have not been granted permanent residency in another country
Your destination was your work location.
Your working contract is for two years, with the ability to extend the contract annually up to a maximum of five years total.
You have a working visa. It does not allow you to stay permanently.
You do not have an exact return date. Your contract only allows you to remain there for a maximum of five years.
You rent an apartment in Country A. Your employer contributes a small proportion of your total rent.
You live alone.
You have a bank account which your salary is paid into in Country A. You also own personal items such as furniture in Country A.
You have bank accounts in Australia.
The only income you are receiving in Australia is a small amount of interest from your Bank accounts.
You do not have employment to return to in Australia.
You do not have any sporting connections with Australia.
You have an active social life in Country A.
You have had your name removed from the electoral role in Australia.
You discontinued your private health insurance in Australia before leaving.
Country A tax has been deducted from your salary before it is deposited into your account.
You are not nor have been a member of the CSS or PSS superannuation scheme.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 6(1).
Income Tax Assessment Act 1997 Section 6-5.
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 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 test
The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.
In considering the definition of 'reside', the courts have stated that the word 'reside' should be given the widest meaning.
The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:
(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.
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 Koitaki Para Rubber Estates Limited v Commissioner of Taxation [1941] HCA 13; 64 CLR 241, Williams J stated (at 64 CLR 241 at 249):
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 have been working in Country A since 20XX. You have not returned to Australia since leaving.
(ii) Nationality
You are an Australian Citizen.
(iii) History of residence and movements
You have lived in Australia and you have Australian Citizenship.
You have a working visa. Your employment contract can be renewed annually to a maximum of 5 years.
You have not returned to Australia since you have been working in Country A.
(iv) Habits and "mode of life"
You have commenced working in Country A. You are living in rented accommodation which your employer contributes a small amount to. You have friends and socialise in Country A.
(v) Frequency, regularity and duration of visits to Australia
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.
You have not returned to Australia since starting work in Country A.
(vi) Purpose of visits to or absences from Australia
You have not returned to Australia since you have been working in Country A.
(vii) Family and business ties to Australia and the overseas country
Family
You are single living and working in Country A. Your parents reside in Australia.
Business or economic ties
You do not have any business ties in Australia.
Assets
You have bank accounts in Australia.
Maintenance of Place of abode in Australia
You do not own a property in Australia. You lived with your parents in Australia.
Summary
As stated above, no one single factor is decisive, the weight given to each factor depends on individual circumstances, and the word 'reside' should be given the widest meaning.
There are various factors outlined above which indicate that you will continue to be a resident of Australia. Specifically;
• You will work in Country A until your contract runs out or a maximum of five years.
• You intend to return to Australia at some point in the future.
• You have bank accounts in Australia.
• You are a citizen of Australia only.
• You own some household effects overseas
• You lived with your parents in Australia
• You have entered into a lease on a rental property in Country A.
Based on a consideration of all of the factors outlined above, you will not maintain a continuity of association with Australia while you are overseas. You do not intend to return to Australia for a considerable period of time. Therefore, you will not be residing in Australia in accordance with the ordinary meaning of the word.
You will not be a resident under the resides test for the income tax year ending 30 June 2014.
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
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.
In your case, you were born in Australia and are an Australian citizen. Therefore, your domicile of origin is Australia. Your domicile will still be Australia while working in Country A as you have not indicated that you will be taking any legal steps to change your domicile to that country.
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.
You have established a permanent place of abode in Country A as you have rented an apartment there and purchased household effects. Your employment contract in Country A can be renewed for up to five years.
As you have established a permanent place of abode outside Australia, you will not be a resident of Australia under the 'domicile and permanent place of abode' test of residency.
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 satisfy this test for the income years as you were not here for more than 183 days.
The superannuation test
An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.
Generally this would include a permanent or temporary employee of the Australian Public Service (APS).
As you are not nor have been a Commonwealth Government employee contributing to the PSS or CSS schemes, you are not considered to be a resident of Australia under the superannuation test.
Conclusion.
As you have not met any of the residency tests under subsection 6(1) of the ITAA 1936 you are not a resident of Australia for income tax purposes.