Edited version of your written advice

Authorisation Number: 1012878925929

Date of advice: 18 September 2015

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes for the period prior to your family joining you overseas?

Yes.

Are you a resident of Australia for taxation purposes after your family joins you overseas?

No.

This ruling applies for the following periods:

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commenced on:

1 July 2015

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You are going overseas to live and work.

You will resign from your employment in Australia.

You have an employment visa to enter the overseas country.

You intend on indicating that you are leaving Australia permanently on your outgoing passenger card.

Your family will remain in Australia for a few months before joining you overseas to live.

You have other children who will remain in Australia as they are adults and not financially dependent on you.

You will live in employer provided accommodation for the first month you are overseas.

You will live in temporary accommodation overseas until you are able to secure more permanent accommodation.

You intend on taking up the option under your work contract relating to rental reimbursement which will cover some of the rental expenses.

Your family home will be rented out in Australia to a family member while you are overseas.

You also have a rental property in Australia.

Your personal items will be transported overseas.

You will give both your cars to your children.

You will be supplied with a car overseas as part of your work contract.

You will retain your self-managed super fund in Australia and you will appoint your children to be trustees.

You will retain bank accounts in Australia and you will notify the banks that you are a non-resident.

You will open a bank account overseas.

You will have your name removed from the electoral roll.

You will notify Medicare and your health insurance company that you are leaving Australia.

You will have health insurance overseas.

You will return to Australia to visit family and for some work purposes.

You will not be in Australia for more than 183 days in any financial year.

Your spouse will not be in Australia for more than 183 days in any financial year.

Neither you nor your spouse are eligible to contribute to the relevant commonwealth super funds.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Subsection 995-1(1).

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.

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 are going overseas to work.

You are leaving Australia permanently.

Your family will remain in Australia for a few months at which point they will join you overseas.

In the recent case of Iyengar v FCT 2011 ATC 10-222, 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 for the period your family remain in Australia as you will retain a continuity of association with Australia.

When your family joins you overseas you no longer will have a continuing association with Australia and you will no longer be a resident of Australia for taxation purposes.

The domicile test

If 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.

The Commissioner is satisfied that you have a permanent place of abode outside Australia for the following reasons:

• Your family will joined you overseas

• You have left Australia permanently

• you will rent accommodation overseas

• you will transport your personal items overseas

You are not a resident under this test from when your family joins you overseas.

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 will not be in Australia for more than 183 days in any financial year.

You are not a resident under this test for the period of your absence.

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 period your family remains in Australia.

You will no longer be a resident of Australia for taxation purposes once your family joins you overseas.