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Edited version of your written advice
Authorisation Number: 1012886478233
Date of advice: 30 September 2015
Ruling
Subject: Residency and leaving Australia
Questions and answers
Are you a resident of Australia for taxation purposes?
No
This ruling applies for the following period
Year ended 30 June 2016
The scheme commenced on
1 July 2015
Relevant facts
You are a citizen of Australia and Country B.
Your country of origin is Country B.
You left Australia to work in Country A.
You intend to remain there permanently.
You are working under a 2 year working visa. This is the maximum period allowed.
The visa does not allow you to stay in Country A permanently.
Both you and your employer plan for you to live in Place A for at least the next 5 to 10 years.
You intend to extend your work visa and shall apply for Permanent Residency once eligible.
You do not intend to return to Australia within the next five years except for 3 day trips.
You are single and have no dependents.
You are currently renting accommodation in Country A on your own.
Your employer has the lease agreement for the apartment, and the rent is deducted from your salary. You have sole usage of the apartment.
You have household objects, bank accounts and an investment portfolio in Country A Market. Most of your assets have either been brought with you to Country A or sold off or transferred to your family.
You have passive social connections and no sporting connections with Australia.
You are actively involved in sport in Country A
You have a bank account, motor vehicle and superannuation portfolio in Australia.
You are not nor have been a member of the CSS or PSS superannuation scheme.
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 (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 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 test
The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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 courts have stated that the word 'reside' should be given the widest meaning.
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 to different countries
(viii) Maintenance of Place of abode.
It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.
Summary
As stated above, no one single factor is decisive, the weight given to each factor depends on individual circumstances, and the word 'reside' should be given the widest meaning.
There are various factors outlined above which indicate that you will not be a resident of Australia for tax purposes. Specifically;
• You will continue to work in Country A on a full time ongoing basis.
• You do not intend to return to Australia to live in the foreseeable future.
• You are renting accommodation in Country A and have taken most of your household effects to Country A with you.
• You do not have a place of abode in Australia.
• You have strong sporting interests in Country A.
• You are single, having no dependents.
• You have joint Country B and Australian citizenship.
• You were born in Country B.
Based on a consideration of all of the factors outlined above, you will not maintain a strong continuity of association with Australia while you are overseas. You do not intend to return to Australia to live in Australia in the foreseeable future.
Therefore, you will not be residing in Australia in accordance with the ordinary meaning of the word.
The domicile test
If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode 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.
An employment visa for two years in Country A would not be seen to be demonstrating a change of domicile of choice.
Your domicile is Australia because you are an Australian citizen.
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.
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.
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'.
Weighing all the factors above in light of your individual circumstances, you have established a permanent place of abode outside Australia in Country A.
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.
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 do not satisfy this test for the income years as you were not in Australia for more than 183 days.
The superannuation test
An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.
Generally this would include a permanent or temporary employee of the Australian Public Service (APS).
As you are not nor have been a Commonwealth Government employee contributing to the PSS or CSS schemes, you are not considered to be a resident of Australia under the superannuation test.
Conclusion
You are not intending to return to Australia to live in the foreseeable future. You have established a new domicile of choice in Country A. You do not meet the 183 day test nor the superannuation test.
You are therefore not a resident for tax purposes in Australia.