Edited version of your written advice

Authorisation Number: 1012746682297

Ruling

Subject: Residency

Question and answer

Are you resident of Australia for tax purposes from the date you left Australia in 20XX?

No

This ruling applies for the following periods:

Year ending 30 June 2013

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Your country of origin is Australia and you are an Australian citizen.

You are not a citizen of any other country.

You departed Australia for an indefinite period of time. Prior to your departure you had been living in a rental property. You disposed of some of your possessions, took some with you and stored some at your parents' residence. You kept your car for use by your family and then it was transferred into your sibling's name.

You worked for a government department prior to leaving Australia.

The reason for leaving Australia was to take up employment in an overseas country.

You secured employment with an overseas consulting company. You later acquired a minor ownership interest in the company.

When you started your new role with the consulting company you worked in country A with the understanding you would relocate to another foreign jurisdiction following the induction period in country A.

You signed a new contract with the company which required you to move to a location which would facilitate the efficient local delivery of a project.

A major client of the program was the Australian Government.

You signed a lease for an apartment in country B for an X month period.

You advised your Australian bank of your new mailing address in country B and cancelled your Australian private health insurance.

You opened a bank account in country B.

During your time living in country B you travelled extensively for work purposes. In the year ended 30 June 2013 you spent 179 days in Australia for work purposes; 68 days in country B and 118 days in 13 various other countries.

Your travel to Australia was to meet with Australian Government officials in relation to existing contracts with the consulting company and to pursue business development opportunities with the Australian Government.

When in Australia you would combine work visits with visiting your family.

Your parents and siblings live in Australia.

Your family members visited you while you were living in country B. Your sibling, and parents visited on separate occasions.

You then moved to country C and continue to live in there in a property you own.

You opened a bank account in country C. You also established a company in country C with a view to sponsoring your residency application. You were issued with a residence visa entitling you to reside in country C and work as a consultant to the company.

You have a long distance relationship with your partner who lives in Australia.

You have had your name removed from the Australian electoral roll.

You have not lodged tax returns in any other country.

Your Australian assets include: bank account and personal possessions stored at parents' house.

Your overseas assets include six overseas bank accounts and shares in seven overseas companies.

You were not a member of a relevant superannuation scheme and not an eligible employee for the purposes of the Superannuation Act 1976.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(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, and

• the Commonwealth superannuation fund test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation 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'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd 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 High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

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 with Australia compared to the foreign country concerned, and

(viii) maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

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.

In the year ended 30 June 2013 you spent 179 days in Australia and 186 days overseas. You left Australia in 20XX with the intention to live and work overseas indefinitely.

Although you may spend more days outside of Australia due to working overseas, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above.

(ii) Nationality

Your country of origin is Australia and you are a citizen of Australia.

(iii) History of residence and movements

You first departed Australia to work overseas for an indefinite period.

You spent YY months working in two different countries.

For XX months you were based in country B and had a rental property there.

You moved to country C.

(iv) Habits and 'mode of life'

You signed a lease for an apartment in country B for an XX month period.

You opened a bank account in country B.

During your time living in country B you travelled extensively for work purposes. In the year ended 30 June 2013 you spent 179 days in Australia for work purposes; 68 days in country B and 118 days in 13 various other countries.

Your travel to Australia was to meet with Australian Government officials in relation to existing contracts with your consulting company and to pursue business development opportunities with the Government.

When in Australia you would combine work visits with visiting your family.

Your family members visited you while you were living in country B. Your sibling, and parents visited on separate occasions.

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

You returned to Australia for 179 days in total, the longest period was for 79 days.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is to work for an overseas consulting company of which you have an ownership interest. The Australian Government is a major client of one of the programs your company facilitates.

Your visits back to Australia are for work purposes and you also combine visits to see family members.

(vii) Family, business and financial ties

Family

Your parents and siblings live in Australia.

You have a partner who remains in Australia. It is a long distance relationship.

Business or economic

You left Australia to take up employment in an overseas country.

You then secured employment with an overseas consulting company which you had an ownership interest.

Your Australian assets include: bank account and personal possessions stored at parents' house.

Your overseas assets include six overseas bank accounts and shares in seven overseas companies.

(viii) Maintenance of a place of abode in Australia

You do not own any properties in Australia.

Summary of the resides test

In your case, you will not be residing in Australia for the purposes of the resides test for the year ended 30 June 2013 for the following reasons:

• You were living in rental premises in country B.

• You were working for an overseas consulting company which required you to travel extensively to Australia and other countries for work purposes.

• You are overseas for an indefinite period of time.

• All of your assets are overseas other than a bank account in Australia.

Other residency tests

Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test.

The 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 (section 10 of the Domicile Act 1982).

In this regard, paragraph 21 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) states that:

• In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

Your country of origin is Australia and you are an Australian citizen, therefore for the year ended 30 June 2013 your domicile remains Australia.

Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

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 (paragraph 12 of IT 2650).

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 14 of IT 2650).

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 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode:

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

(ii) 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;

(iii) 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;

(iv) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(v) the duration and continuity of the taxpayer's presence in the overseas country; and

(vi) 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.

As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Paragraph 24 of IT 2650 instructs that the weight of each factor will vary with individual circumstances and no single factor is decisive. However, 'greater weight should be given to factors (c) the establishment of a home outside Australia, (e) the duration and continuity of the individual's presence in the overseas country and (f) the durability of association that the individual has with a particular place in Australia than to the remaining factors'.

In your case, the Commissioner is satisfied that you had established a permanent place of abode outside of Australia for the following reasons:

• You signed a lease for an apartment in country B for XX months.

• You opened a bank account in country B.

• You were now working for an established overseas consulting company.

• Your visits back to Australia were for work purposes to meet with government officials.

• You then moved to country C where you have established a company and a home.

As the Commissioner is satisfied that you have a permanent place of abode outside Australia, you are not a resident of Australia for income tax purposes under this test.

3. The 183-day test

Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that your usual place of abode is outside Australia and you have no intention to take up residence here.

You were not present in Australia for more than 183 days in the year ended 30 June 2013. Thus, you are not a resident under this test.

4. The superannuation test 

You will be a resident if you are eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or you are the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

You were not a member of a relevant superannuation scheme and not an eligible employee for the purposes of the Superannuation Act 1976.

Therefore, this test does not apply to you.

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, you are not an Australia resident for income tax purposes.