Edited version of your written advice

Authorisation Number: 1013027733290

Date of advice: 7 June 2016

Ruling

Subject: Residency - departing Australia, foreign income

Question 1

Was I an Australian resident for tax purposes for the period 1 July 2014 to 30 June 2016?

Answer

No.

Question 2

What is the situation when part of a financial year is spent as a resident, and part of a year is not (given my leaving and returning to Australia occurred in April)?

Answer

Not applicable. Refer "Further issues for you to consider".

Question 3

Are the academic scholarships and grants received while in Country A assessable?

Answer

No.

Question 4

Are the wages received while in Country A assessable?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on:

1 July 2014

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian citizen who has lived the majority of your life in Australia. Between 1 July 2014 and 30 June 2016 you resided in Country A on a temporary student visa whilst studying.

You did not return to Australia between June 2014 and June 2016.

You are single with no dependents.

In Country A you received a scholarship. Your only income was from your scholarship plus a small amount of work in the local economy.

In 20XX you received a research grant which did not include any living expenses.

While in Country A you lived initially in student accommodation before using the services of a local real estate agent to rent an apartment which you furnished as an abode. You had intended to stay in Country A for up to 5 years however decided to return to Australia after 2 years.

You returned to Australia in 20YY and now intend to live permanently in Australia.

You do not own and did not maintain a home in Australia.

You had no assets in Australia apart from a bank account and personal possessions which were stored.

On leaving Australia you were unsure whether you would study and work overseas for 2 - 5 years. In the event you decided to return to Australia after 2 years absence.

You suspended your health insurance before departing Australia.

Reasons for decision

Section 6.-5 of the Income tax Assessment Act 1997 (ITAA 1997) -

• 6-5(2) If you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

• 6-5(3) If you are a foreign resident, your assessable income includes:

a) The ordinary income you derived directly or indirectly from all Australian sources during the income year; and

b) Other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source.

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.

Based on the facts you have provided, we can conclude that you will not satisfy any of the tests of residency.

Accordingly you are not a resident of Australia for income tax purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.

From the date you cease to be an Australian resident, there is no need to show your foreign-source income in your tax return. Also, all Australian-sourced interest, dividends and royalties you received after you ceased to be an Australian resident are subject to the withholding tax provisions as a final tax. If withholding tax has been deducted they should not be included in your tax return.

Wages received while in Country A are foreign-source income.

Therefore, as a non-resident your foreign source income is not assessable in Australia.

Further Issues for You to Consider

When part of a financial year is spent as a resident, and part of a year is non-resident, answer 'yes' to the question 'Are you an Australian resident?' on your tax return and complete the "Adjustments" section of the taxation return (refer instructions in Section A2 of the Individual Tax Return Instructions.

ATO view documents

Taxation Ruling TR 98/17 - Income tax: residency status of individuals entering Australia

Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia

Taxation Ruling IT 2650A (Addendum) - Income tax: residency - permanent place of abode outside Australia

Other references (Non ATO view - example court cases, etc):

Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01

Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014)

Federal Commissioner of Taxation v Miller [1946] HCA 23; (1946) 73 CLR 93.

Levene v Inland Revenue Commissioners [1928] UKHL 1; [1928] AC 217.

Applegate v Federal Commissioner of Taxation [1978] 1 NSWLR 126