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Edited version of your written advice
Authorisation Number: 1051179019412
Date of advice: 9 January 2017
Ruling
Subject: Residency - leaving Australia
Residency
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 and your family have gone to Country Y on a permanent basis.
You and your spouse rent accommodation in country Y.
You have taken all your household and personal items to Country Y.
You will perform work for an Australian employer in Country Y.
You will return to Australia for up to 6 weeks for holidays with your family.
You may return to Australia for up to 4 weeks to attend conferences.
Based on the facts above for the period you are living and working in Country Y you will not be a resident of Australia for taxation purposes as you will not maintain a continuity of association with Australia.
The domicile test
If a person's domicile is Australia they will be 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.
Your domicile is Australia.
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.
The Commissioner is satisfied that you will set up a permanent place of abode outside Australia for the following reasons:
● You rent accommodation in Country Y
● Your family has gone to Country Y with you
● You have left Australia permanently
You are not a resident 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 will not be in Australia for more than 183 days in any financial year while you are living and working in Country Y.
You are not a resident under this test.
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 fund.
You are not a resident under this test.
Your residency status
You are not a resident of Australia for taxation purposes for the period you are living and working in Country Y.
Source of income
Section 6-5(3) of the ITA 1997 states that if you are a foreign resident of Australia your assessable income includes the ordinary income you derived directly or indirectly from all Australian sources during the income year. 'Australian source' is defined in section 995-1 of the ITAA 1997 Act:
ordinary income or statutory income has an Australian source if, and only if, it is derived from a source in Australia.
The source of a taxpayer's income is the place where the services are performed: French v. FC of T (1957) 98 CLR 398.
In your case the source of the income derived from work performed for the Australian employer will not have an Australian source as you perform all duties as part of your employment in Country Y from your home office.
This income is not assessable in Australia.