Edited version of your written advice

Authorisation Number: 1012897138600

Date of advice: 20 October 2015

Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commences on:

28 August 2015

Relevant facts and circumstances

You were born in Country Z.

You and your family later migrated to Australia.

You are a citizen of both Australia and Country Z.

You are single with no dependants.

You departed Australia to live and work in Country K for a period.

You entered Country K on a visa that was supplied by your employer. The visa is valid for a period.

While in Country K you live in an apartment that is provided to you by your employer and rented under your employer's name.

Prior to departing Australia you lived at your parent's home.

Your assets in Australia consist of bank accounts.

Your assets in Country K consist of bank accounts.

You do not intend to return to Australia during your stay in Country K.

You do not have any professional, social or sporting ties with either Australia or Country K.

You have maintained your Australian private health insurance policy.

You have not informed the Australian Electoral Commission or Medicare that you were departing Australia.

You have never been an employee of the Commonwealth Government of Australia.

You intention is to work for a period in Country K before returning to Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Assessability of Income

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. 

Residency

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

• the resides test,

• the domicile (and permanent place of abode) test,

• the 183 day test, and

• the superannuation test.

The first two tests are examined in detail in TAXATION RULING NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia. The latter two tests are relatively self-explanatory as they require the individual to either be physical present in Australia for a period greater than 183 days or be eligible to contribute to the PSS or CSS superannuation schemes.

An individual need only satisfy the conditions of one of the four tests to be deemed a resident of Australia for income tax purposes.

The test that is most relevant in your circumstances is the 'domicile (and permanent place of abode) test.

The domicile test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

In your case, your domicile of origin is Country Z. You and your family then migrated to Australia and became Australian citizens therefore electing Australia as your domicile of choice. From the information that you have provided you do not intend to apply to be a citizen or permanent resident of Country K, therefore your Australian domicile will remain unchanged.

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. 

Paragraph 23 of Income Tax Ruling IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

a) the intended and actual length of the taxpayer's stay in the overseas country;

b) 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;

c) 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;

d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

e) the duration and continuity of the taxpayer's presence in the overseas country; and

f) the 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.

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

In your case, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. Significant in reaching this conclusion is that you will only be in present in Country K for a short period before returning to Australia. While in Country K you live accommodation that is dependent on your continued employment. You have maintained your Australian bank accounts and health insurance and not informed either the Australian Electoral Office or Medicare that you were departing Australia.

Accordingly, as your Australian domicile has remained unchanged and the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia you are a resident of Australia for income tax purposes under this test.

As you are a resident under the domicile test there is no need to consider the other 3 tests for residency.

Your residency status

As you are a resident of Australia under the domicile test, you remain an Australian resident for income tax purposes while living and working in Country K under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.

As it has been determined above that you will be a resident for tax purposes while working in Country K, your income from all sources (including Country K) during the period will be assessable in Australia.