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Edited version of your written advice
Authorisation Number: 1051195665476
Date of Advice: 27 February 2017
Ruling
Subject: Foreign sourced income and rental income.
Question 1
Are you a resident of Australia for taxation purposes?
Answer
No.
Question 2
Is your foreign sourced income assessable in Australia?
Answer
No.
Question 3
Is your rental income derived in Australia assessed at non-resident rates?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You were born in Australia.
You are a citizen of Australia.
You are not a permanent resident of any other country.
You and your family went to Country Y to live and work.
Your intention is to be working outside Australia in Country Y for more than 2 years.
Your employment in Country Y is permanent full-time.
You have an employment visa to work in Country Y and this can be renewed.
You are employed by a Country Y company and you are required to pay tax in Country Y.
You are provided with accommodation and a car in Country Y and the accommodation is for you and your family's sole use.
Your children are enrolled in school in Country Y.
Your spouse does not intend on working in Country Y and will take care of the children.
Your family home in Australia is being rented out and you have a bank account in Australia to facilitate the rental income.
You took furniture and personal items to Country Y.
You have no social or sporting connections in Australia.
You will return to Australia for short visits while in Country Y and you will not exceed 183 days in any financial year.
You will stay with your parents when you return to Australia.
You stated on your outgoing passenger card when you left Australia that you were leaving permanently.
You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 995-1(1).
Income Tax Assessment Act 1936 Subsection 6(1).
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.
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:
Physical presence in Australia
Nationality
History of residence and movements
Habits and "mode of life"
Frequency, regularity and duration of visits to Australia
Purpose of visits to or absences from Australia
Family and business ties to different countries
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 to live and work for more than 2 years.
Your accommodation is provided and for your sole use.
You will only return to Australia for short visits and will not exceed 183 days in any financial year.
Based on the facts above you are not 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 set up a permanent place of abode outside Australia for the following reasons:
Your family has gone to Country Y with you
You have a permanent work position in Country Y
Your accommodation is provided in country Y
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 for the period you are 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 working in Country Y.
You are not required to declare the income derived in Country Y in your Australian tax return and your rental income along with any other income derived in Australia will be taxed at the non-resident rates and must be included in your Australian tax return.