Edited version of your written advice

Authorisation Number: 1051327438156

Date of advice: 19 January 2018

Ruling

Subject: Residency

Question 1

Are you an Australian resident for tax purposes from 1 January 201C?

Answer

No

Question 2

Will you need to include your Country Z income from 1 January 201C onwards in your Australia income tax return?

Answer

No

Question 3

Are you eligible for the tax-free threshold until 31 December 201B?

Answer

Yes

Question 4

Are you liable to pay the Medicare Levy from 1 January 201C?

Answer

No

This ruling applies for the following period:

Year ending 30 June 201C

Year ending 30 June 201D

The scheme commences on:

1 July 201B

Relevant facts and circumstances

You departed from Australia in 201B indefinitely.

You started your position at Company X in 201B.

You arrived in Country Z in 201C with the intention to reside there indefinitely.

The intention to reside permanently arose in 201B when you were offered a full time position in Country Z by your employer.

You were granted a working visa which was supplied by your employer and is currently valid for X years.

You have a resident permit valid until 1 January 202E.

You plan to extend your visa by another 2 years making you eligible to apply for permanent residency.

You stayed in a number of properties through hotels and Airbnb before securing a lease property in Country Z.

Prior to moving to Country Z, you have always rented in Australia since 201A.

You currently hold an Australian bank account and own a car.

You sold all your furniture and valuables before departing from Australia.

You have shipped a number of suitcases containing personal effects since arriving in Country Z.

You paid all expenses related to your relocation as your employer did not cover any of it.

You derive no income from Australia.

You have no dependents or social commitments in Australia except for parents and friends.

You changed your electoral roll status ahead of recent plebiscite and registered as an overseas voter.

You have advised Medicare to have your name removed from the records.

You have advised your Australian bank you live overseas.

You have informed your private health insurance provider that you were moving overseas and suspended your policy.

You are a member of a professional organisation in Country Z.

You have not lodged a tax return with the Country Z tax office yet.

On your outgoing passenger card, you stated you were migrating to the Country Z for work purposes indefinitely.

You do not have a position or job held for you in Australia.

You travelled to Australia in 201C for work purposes.

You only return to Australia to visit family and friends and when directed by your employer.

Your country of origin is Australia.

You have not been in Australia for more than 183 days.

You are not eligible to contribute to the relevant Commonwealth superannuation fund.

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

Summary

You are not an Australia resident for tax purposes from 1 January 201C as you do not meet any of the four residency tests.

Detailed 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).

Section 6-5 of the 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 Taxation Ruling IT 2650 Income tax: residency – permanent place of abode outside Australia 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 intended to leave Australia permanently and began residing in Country Z in 201C.

You started your employment contract in 201C in Country Z which was to continue for X years. You were granted a working visa which was supplied by your employer and is currently valid for X years.

You plan to extend your visa by another X years making you eligible to apply for permanent residency.

On your outgoing passenger cards, you stated were migrating to Country Z for work purposes indefinitely.

You lease a property in Country Z.

You sold all your furniture and valuables prior to moving to Country Z and have shipped a number of suitcases containing personal effects since 201C.

You generally work at the Country Z office but may be required to work at other locations at the discretion of your employer.

You only return to Australia to visit family and friends and when directed by your employer.

You are a member of a professional organisation in Country Z.

You are not residing in Australia according to ordinary concepts due to your ongoing employment, living arrangements and intention to remain living and working overseas.

The domicile test

Domicile

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law (Henderson v. Henderson [1965] 1 All E.R.179; Udny v. Udny [1869] L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.)).

In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1) of the ITAA 1936, it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency e.g., the end of his or her employment. On the other hand, if that person has in mind only a vague possibility of returning to Australia, such as making a fortune (a modern example might be winning a football pool) or some sentiment about dying in the land of his or her forebears, such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country - see In the Estate of Fuld (No. 3)(1968) p. 675 per Scarman J at pp. 684-685 and Buswell v. I.R.C (1974) 2 All E.R. 520 at p. 526.

Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa.

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 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.

Although you are maintaining an association with Australia through your bank account and voting rights, your associations with Country Z are more significant as:

● You leased a property in Country Z;

● You shipped a number of suitcases containing personal effects;

● You obtained employment in Country Z

● You are a member of a professional organisation in Country Z.

Based on these facts, it is therefore considered that you have established a permanent place of abode in Country Z. Therefore, you are not considered to be an Australian resident under the domicile 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 were not in Australia for more than 183 days in the 201B-1C financial year. It is accepted you have a place of abode outside of Australia and do not intend to return to Australia.

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 are not eligible to contribute to the relevant Commonwealth super fund.

You are not a resident under this test.

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

Accordingly you were 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.

Assessable Income

Where you are a resident of Australia for taxation purposes, under section 6-5 of the ITAA 1997 provides 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.

It is accepted you are not a resident of Australia for income tax purposes from 1 January 201C. Accordingly, you do not need to include income derived from Country Z and only need to include any income derived from an Australian source in your Australian income tax return.

Tax-Free Threshold

The tax-free threshold is generally available to Australian residents for tax purposes. You are an Australian resident for tax purposes until 31 December 2016 and consequently, you are eligible for the tax-free threshold until you are no longer a tax resident of Australia.

Medicare Levy

Generally, Australian residents for tax purposes are liable to pay the Medicare levy. However, from 1 January 201C onwards, you are not considered to be an Australian resident for tax purposes and hence, you are not liable to pay the Medicare levy.