Edited version of your written advice

Authorisation Number: 1012996857460

Date of advice: 18 April 2016

Ruling

Subject: Residency - DTA

Questions and answers:

Are you a resident of Australia for the year ended 30 June 20XX?

No.

Is the income that you derived whilst in Country X during this period assessable in Australia?

No.

Is the income derived during the X days spent in Australia during this period assessable?

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20YY

Relevant facts and circumstances

You left Australia to Country X.

You returned to Australia for a total of X days during the relevant period for employment purposes.

You continue to work for an Australian based employer whilst in Country X.

Your spouse who is a Country X citizen accompanied you.

You live in a rental property under a long term lease.

You intend to stay in Country X indefinitely and are looking to purchase property.

You have no assets in Australia except for a bank account and a rental property.

You have private health insurance in Country X and not Australia.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Your residency status

For the year ended 30 June 20XX you are not considered a resident of Australia for the purpose of income tax as you do not meet any of the residency test requirements outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA1997. Any amounts assessable in Australia after you stopped being an Australian resident will be at the non-resident tax rates.

Reasoning

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 test,

• the 183 day test, and

• the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

• whether the person is physically present in that country at some time during the year of income

• the history of the person's residence and movements

• if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

• if the person is outside the country for part of the relevant income year, the purpose of the absences

• the family and business ties which the person has with the particular country, and

• whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

• You moved to Country X with your spouse.

• After arriving in Country X you only returned to Australia for employment requirements.

• Whilst you owned and maintained a property in Australia the property was being tenanted during the relevant period.

• You intend to remain in Country X indefinitely.

• You entered into long term rental arrangements in Country X during the relevant period.

Therefore, you do not meet the requirements of the resides test and were not a resident for tax 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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to 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.

You made a permanent move from Australia to live in Country X and because you are able stay there on a permanent basis it is accepted that you appear to have adopted Country X as your domicile of choice. This is evident in the fact that you moved to Country X with your spouse and kept a minimal amount of connections with Australia.

Additionally, the Commissioner is satisfied that you have a permanent place of abode outside Australia.

Therefore, you do not meet the requirements of the domicile test and were not a resident for tax purposes.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent place of abode is outside of Australia and they have no intention of taking up residence here.

You were not present in Australia for more than 183 days in the relevant period.

Therefore, you were not a resident of Australia for income tax purposes 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.  Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

You are not an employee of the Commonwealth Government of Australia and you are not a contributing member of the PSS or CSS.

Therefore, you were not a resident of Australia for income tax purposes under the superannuation test.

Taxation of your salary from your Australian employer

Summary

The income you derive whilst in Country X will not be assessable in Australia, however any income you derive whilst working for an Australian company in Australia will be assessable.

Reasoning

As you are not a resident of Australia for taxation purposes for the period ended 30 June 20XX the income you earn whilst in Country X will not be taxable in Australia.

However, you have been employed by an Australian based company and were also present in Australia for a number of days during the period in question.

An article in the Double Taxation Agreement between Australia and Country X provides that you will be taxable on any income you earn whilst in Australia.