Edited version of your written advice

Authorisation Number: 1012774454841

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on

1 September 20XX

Relevant facts and circumstances

You are a citizen of Australia and also of a foreign country.

You have not been granted permanent residency by any country.

Australia is your country of origin; you were born here.

You departed Australia.

Your destination overseas was a foreign country.

You did not need a visa to enter a foreign country as have a passport which allows you to stay permanently.

The purpose of your overseas visit is work and travel.

Your plan is to stay in a foreign country for several years. You have no plans to take up permanent residency in a foreign country.

You are not sure when you plan to return to Australia. You do not hold a return airline ticket.

You have not come back to Australia for any period since first leaving Australia.

Your assets overseas are two bank accounts in a foreign country.

Prior to leaving you lived in your property. It is rented out while you are overseas.

In a foreign country you live in rented accommodation. The term of the lease is several months. The lease is renewable; you have just renewed it. You share the flat with a friend. Both yours and your friend's names are on the lease.

Your assets in Australia:

• a property

• some shares

• a bank account

• a credit card

• some personal items being stored at someone's house.

Your household effects in Australia were sold or given to charity.

You are receiving rental income from Australian.

You have employment in a foreign country. You have an ongoing temporary role. You have been offered a contract. You believe that the contract can be extended.

Initially you took unpaid leave from your job in Australia but that has now lapsed and you have resigned from the position.

None of your family accompanied you overseas.

You are not married and do you have any children.

You have no social and sporting connections with Australia.

You have no social and sporting connections with a foreign country.

You have never been a Commonwealth Government of Australia employee for superannuation (super) purposes.

You cannot remember if you advised the Australian Electoral Office to have your name removed from the electoral roll.

You have advised your Australian financial institution and companies with whom you have investments that you have moved overseas for a while.

You have advised your private health insurance that you were going overseas and they have suspended your cover.

You stated as the reason for going overseas when completing the Australian Immigration Outgoing passenger card as a temporary move to a foreign country to work overseas.

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. In your case you:

• have gone to a foreign country to live, work and travel

• plan to stay in a foreign country several years

• are not sure when you plan to return to Australia

• do not hold a return airline ticket

• have not come back to Australia for any period since your departure

• have two bank accounts in a foreign country

• have a property in Australia which has been leased

• sold or gave away your household effects in Australia

• have been offered an employment contract which you believe can be extended.

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.

You have not formed an intention to make your home indefinitely outside Australia. However, currently you do not have any plans to return to Australia.

The Commissioner is satisfied you have 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, i.e. 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 have not been present in Australia for a total period of more than half of a year of income.

Therefore you are not 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.

You have stated that you are not a member of the PSS or CSS, nor are you eligible to contribute to one. Further, you have no spouse and 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.