Edited version of your written advice

Authorisation Number: 1012843369266

Date of advice: 31 July 2015

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 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on

1 November 2012

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You moved to a foreign country to live and work.

Applications to become permanent residents of a foreign country cannot be made until a person has resided in a foreign country for at least seven consecutive years. You and were granted permanent resident status in a foreign country.

You are employed by a foreign country based airline. You have been in your profession for them for several years. Your roster starts and finishes in a foreign country.

You have jointly owned your principal residence in a foreign country since arriving there. Initially this was a dwelling.

Once you became a permanent resident of a foreign country, you sold your first dwelling and jointly purchased a new principal residence in a foreign country.

When visiting Australia, your foreign country residence remains vacant.

Between selling your first dwelling and purchasing your second, several months, you stayed mostly with friends and occasionally in hotels. Your spouse was already in Australia caring for a terminally ill person.

When you departed Australia you owned a residential property, which you retained as an investment property but sold.

Your parent passed away.

You have no children.

When your spouse returned to Australia, you remained working in a foreign country and maintained the family home. Your spouse will return to a foreign country permanently after the ill person passes away.

You visit your spouse and the ill person while you are on leave. None of these visits exceeds 183 days in any 365 day period. Some visits are as short as a few days while you are working. While on approved leave, visits could be up to a few weeks. Your spouse visits you occasionally in a foreign country. However, as the ill person's condition deteriorated, this became less feasible.

You and your spouse purchased a property in Australia for your spouse to live in while supporting the ill person. No assets were relocated from a foreign country; all furnishings for the house were purchased locally. On the death of the ill person, the house and all furnishings will be sold and they will return to home in a foreign country.

When in Australia, your foreign country residence remains vacant.

You have bank accounts are in a foreign country.

You and your spouse have a joint bank account in Australia and is used to manage the mortgage on the rental property, until its disposal. You also have a joint account used to manage an investment in a property unit trust.

You and your spouse have been members of a club in a foreign country for several years.

You have no intention of relocating back to Australia.

When completing the Australian Immigration Outgoing passenger card you stated as the reason for going overseas that you were Australian residents departing Australia permanently. On arrival to Australia you state that they are visitors to Australia and visiting relatives on their inbound passenger cards.

Neither you nor your spouse has ever been members of a Commonwealth Government of Australia superannuation scheme.

You are over 16 years of age.

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.

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

• you moved to a foreign country to live and work; your spouse moved there too

• you and your spouse became a permanent residents of a foreign country

• you have been employed by a foreign country based airline for several years

• you have owned jointly with your spouse your principal residence in a foreign country since arriving; initially in one dwelling and then another

• between selling your first dwelling and purchasing another, some months, you stayed with mostly with friends and occasionally in hotels

• when you departed Australia you owned solely a residential property which you retained as an investment property until you sold it recently

• your spouse returned to Australia to care for an ill person but will return to live with you in a foreign country after the ill person passes away

• you visit Australia for short periods to be with your spouse and the ill person; at these times your foreign country residence remains vacant

• you purchased jointly with your spouse a property in Australia to live in while they support an ill person; all furnishings were purchased locally and nothing was sourced from a foreign country; when the ill person passes away, the house and furnishings will be sold and your spouse will return to your home in a foreign country

• you have bank accounts in a foreign country

• you have bank accounts in Australia to manage your investment property until it was sold, manage the mortgage on the jointly owned property your spouse lives in and an investment in a property unit trust

• you have few family ties to Australia; you have no children and your parent passed away

• you have been a member of the a foreign country based club for several years

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.

You are still an Australian citizen while living in a foreign country. However, you have obtained permanent residency in a foreign country, consequently your domicile of choice is now a foreign 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.

In your case:

• you have lived and worked in a foreign country for several years

• your spouse moved to a foreign country at this time to live with you

• you became a permanent resident of a foreign country

• initially you lived in a dwelling then sold it and purchased another; both owned jointly with your spouse

• between selling your first dwelling and purchasing your second dwelling, several months, you stayed with mostly with friends and occasionally in hotels; this delay was caused by the difficulty you had in obtaining a dwelling to live in

• when you departed Australia you owned a residential property which you retained as an investment property but sold recently

• you purchased jointly with your spouse a property in Australia for her to live in while they support a terminally ill person; when they passe away, the house and furnishings will be sold and your spouse will return to your home in a foreign country

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

Therefore, you are not 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 have not been present in Australia for a total period of more than half of the 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 neither you nor your spouse is eligible to contribute to the PSS or the CSS. 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.