Edited version of your written advice

Authorisation Number: 1051298319311

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You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.

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Date of advice: 23 October 2017

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods

Year ended 30 June 2017

The scheme commenced on

1 July 2016

Relevant facts and circumstances

General

You are an Australian citizen by birth.

You departed Australia for a foreign country.

You have not been granted permanent residency by any country. In a foreign country it is not possible for a non-local to be granted permanent residency. You are either a resident or a national.

In a foreign country you have a residency visa. This visa is renewed every X years as long as you continue to have gainful employment. X years is the maximum visa they will grant, but it can be renewed indefinitely.

Your visa is an employer sponsored visa, which is the only type available that permits work.

Your intention is to make your home indefinitely outside Australia.

You informed the Australian Electoral Commission and Medicare that you were departing Australia.

You did not advise your private health insurance provider to have your policy suspended or cancelled as it also covers international needs. You also have a separate private health insurance policy in a foreign country, but it is more restricted than the Australian one.

You are not eligible to contribute to the PSS or CSS. You and your spouse are estranged. You are more than 16 years of age.

When completing incoming and outgoing passenger cards, you stated your residence as a foreign country. You don’t put an overseas address on these cards, but you have used your overseas telephone number. For the Australian address, it depends where you might be staying on a trip to Australia.

Since departing Australia, you have returned to Australia for four short visits, totalling about two weeks.

Accommodation

You have initially rented an apartment on an annual lease, recently renewed. In a foreign country residential leases cannot be longer than 12 months.

Your intention is to purchase a property there to live in. You owned a property there when you lived there previously.

Assets

In preparation to move overseas, you:

● Disposed of all your Australian property interests, including your home.

● Sold your car.

● Resigned from boards that you had sat on.

● Progressively closed down any trading of your private business interests.

You have advised your Australian superannuation fund that you had departed Australia and you have ceased making contributions to it.

You have closed your Australian bank accounts. You have a credit card.

You moved all your personal effects from Melbourne to a foreign country.

You purchased a new car in a foreign country with an year extended warranty on a lease.

You have not and will not make any investments in Australia while you are overseas.

You do not lodge any foreign income tax returns while living overseas. In a foreign country do not require tax returns. You pay local tax that is the main tax paid in a foreign country by individuals.

Family and social connections

You are estranged from your spouse who is independent of you. They have their own full time employment and live in a house that you have never lived in.

You maintain only one social/sporting connection with Australia.

You have established social and sporting connections in a foreign country being involved in several groups.

You have a foreign country driver’s licence and an ID Card.

You have maintained professional/occupational memberships in Australia.

Employment

Regarding your employment in a foreign country, you:

● Accepted permanent full time employment.

● Are a permanent partner based in a foreign country office.

● Provide advisory services across the region.

● Are employed for an indefinite period and only subject to a retirement age of 60.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(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 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

● the resides test

● the domicile test

● the 183 day test

● the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides.

However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

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.

Based on the facts you have provided, the Commissioner considers you were not residing in Australia according to the ordinary meaning of the word ‘resides’. As a result, you are not a resident of Australia for taxation purposes under this test.

The domicile and permanent place of abode test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

As you are still an Australian citizen while living in a foreign country, your domicile is Australia and remains unchanged.

Permanent place of abode

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. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

It is clear from the case law that a person’s permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

In the foreign country you have a residency visa, which lasts for two years but can be renewed indefinitely, as long as you are employed. You do not have the right to reside there permanently. However, as stated above, a permanent place of abode does not have to be everlasting or forever. In your case, you have rented an apartment on an annual lease with the intention of purchasing a property there to live in; as you have done previously. Also, you have sold your home in Australia and moved all your personal effects to a foreign country and your intention is to make your home indefinitely outside Australia. Further, you are estranged from your spouse who lives a separate life in Australia in their own home.

The Commissioner is satisfied you have a permanent place of abode outside of Australia.

Therefore, you are not a resident of Australia under the ‘domicile and permanent place of abode’ test of residency.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

You have not been present in Australia for a total period of more than half of the year of income.

Therefore you are not a resident of Australia 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. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You are not eligible to contribute to the PSS or CSS. You and your spouse are estranged. You are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you were not an Australian resident for taxation purposes for the year of the ruling.