Edited version of your written advice

Authorisation Number: 1012877369365

Date of advice: 16 September 2015

Ruling

Subject: Residency and leaving Australia

Questions and answers

Are you a resident of Australia for taxation purposes while your spouse is living in Australia?

Yes

This ruling applies for the following period

Year ended 30 June 2015

The scheme commenced on

January 20YY

Relevant facts and circumstances

You are a citizen of Australia

You have been a tax resident of Australia for the period up to 30 June 20XX.

You signed an employment contract as Manager/Director in December 20XX.

You commenced work in Country A in January 20YY.

You currently have a Country A Business Visa (Multi Entry).

You returned to Australia for a short period to obtain your Country A work permit as this process must be done in the country your passport is issued.

You have applied for a two year work permit which you will apply to extend when it runs out. This is the maximum length of time a work permit can be applied for. There has been a delay in the work permit process and you expect your request to be approved by the end of a particular month. This is the most permanent Visa you can obtain, which will enable you to sponsor your spouse to move to Country A with you.

Your employer will act as your sponsor within Country A and will be responsible for assisting you in proper entry, residence and employment permits and visas as required by the Country A Government Authorities.

Your contract is for an unspecified period and is terminable at any time by either party, with 30 days notification in writing to the other party. It is the intention of both parties that this is a permanent ongoing role for the foreseeable future.

Remuneration is paid in Country A currency into your bank account.

You own a property in Australia jointly with your spouse.

You have children who reside in Australia and are currently completing their studies.

You are currently living in a home subleased by your employer to you until such times as you secure your work permit at which point you can legally purchase and/or rent property.

You intend to work in Country A for a significant period of time, then retire and then travel to the Country B with your spouse.

Your spouse will remain in Australia living in your property pending the sale of it. It has been on the market for approximately six months. You are still yet to agree contractually with a buyer despite dropping the price significantly in order to sell quicker. You will continue to find additional avenues to sell your house in due course.

Your children will remain in Australia to complete their study and will then establish their own residence in Australia.

Your spouse will join you in Country A once you have obtained your work permit and are able to sponsor them as a resident.

Your spouse will be travelling at the end of the year to Country A with your personal effects.

You have moved all your personal possessions to Country A.

You will not be returning to Australia for domestic purposes nor at this stage for any other reason.

You have severed all ties with Australia since gaining your employment in Country A.

You cannot gain a Country A motor vehicle licence and so are driving in Country A on an international drivers licence.

Your employer provides you with a motor vehicle as part of your salary package.

You have created Electricity and Water accounts in your employers name as the premises were required to be leased by your employer.

You pay these accounts personally and receive no reimbursement from your employer.

You are registered with the Australian Embassy and have joined a businessmen's group and running group in Country A.

You are no longer a member of any clubs/associations in Australia.

You have a joint account with your spouse on Australian held bank accounts.

You have retained your superannuation accounts in Australia as your spouse cannot withdraw their funds until they receive sponsorship in Country A.

Neither you nor your spouse are members of the Commonwealth Government superannuation schemes PSS and CSS nor have you been a member.

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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

• resides test

• domicile and permanent place of abode test

• 183 day test and

• Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

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.

You commenced work in Country A in January 20YY.

Your spouse will remain in Australia until they receive sponsorship to join you in Country A.

You do not intend on returning to Australia to live. In the recent case of Iyengar v FCT [2011] AATA 856, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.

Based on the facts above you will be residing in Australia according to ordinary concepts until your spouse joins you in Country A and your property is sold. You retain a continuity of association with Australia as your spouse has remained in Australia, your property remains unsold.

You will continue an association with Australia until your spouse joins you in Country A and your property in Australia is sold.

You are a resident of Australia for taxation purposes for the period from leaving Australia till your spouse joins you in Country A.

The domicile test

A person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.

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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

Your domicile of origin is Australia and your domicile of choice is Country A.

The Commissioner is satisfied that you will not have a permanent place of abode in Australia until your spouse moves to Country A to live with you for the following reasons:

• Your spouse will join you in Country A and your Australian abode will be sold.

• You do not intend on returning to Australia to live

• Your work contract is for an indefinite period

You will be a resident under this test until your spouse moves to Country A to live with you and your Australian property is sold.

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 were in Australia for more than 183 days in the 20XX-YY financial year.

We are satisfied that you will have a place of abode outside Australia when your spouse moves to Country A to live with you, your property is sold and that you intend to take up residency in Country A.

These conditions were not met in the 20XX- YY financial year.

You are a resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the 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 and your spouse are not eligible to contribute to the relevant Commonwealth super funds.

You are not a resident under this test.

Your residency status

You are a resident of Australia for taxation purposes for the 20XX-20YY financial year as you a resident under least one of the residency tests in subsection 6(1) of the ITAA1936.