Edited version of your written advice

Authorisation Number: 1051344176715

Date of advice: 5 March 2018

Ruling

Subject: Residency

Questions and answers

1. Are you a resident of Australia from 1 July 2016 until you departed Australia?

Yes.

2. Are you a resident of Australia from 1 July 2017?

No

This ruling applies for the following periods

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

Year ending 30 June 2021

The scheme commenced on

1 July 2016

Relevant facts and circumstances

General

Your country of origin is overseas. You are an Australian citizen.

You are also a citizen of another country. You were eligible for that citizenship through marriage.

You have not been granted permanent residency by any country.

You departed Australia for the foreign country.

Your contract of employment in the foreign country began when you departed the country.

You were an Australian resident for tax purposes immediately prior to leaving Australia.

Your visas were not supplied by an employer but your work permit in the foreign country is linked to your employment with the foreign employer.

You returned to Australia after first leaving for two short trips:

You did not inform the Australian Electoral Commission or Medicare that you were departing Australia.

You advised your private health insurance provider to have your policy suspended or cancelled.

When completing incoming and outgoing passenger cards, you stated as your residency status that you are an Australian citizen.

You will lodge Australian income tax returns while you are overseas.

You plan to spend most of your time overseas during the term of your employment contract.

You plan to return to Australia once per annum during the term of the contract.

You plan to return to Australia once your contract has terminated.

Accommodation

The accommodation provided by the employer is a furnished house in a compound.

The accommodation provided by your employer is for your exclusive use and is provided rent free.

Assets

You and your spouse have not sold your home in Australia and are presently renting it out furnished:

● It was first rented on X 2017.

● It has been rented to unrelated parties under normal commercial lease arrangements at normal commercial rent rates.

● It is managed by real estate agents.

● You continue using the address of this residence as your address on any documents.

● You remain responsible for a mortgage on this residence and continue paying the mortgage whilst you are overseas.

● You continue having mail sent to this address in Australia.

Apart from your house and bank accounts, you maintain assets in Australia:

● Furniture

● Superannuation

● Australian shares

You have investments in Australia while you were overseas.

Your personal effects in Australia (photo’s, DVD’s, CD’s, games, etc.) are still stored in the property.

Your current salary is paid by the foreign country in Australian dollars into your Australian bank account.

You have not advised any Australian financial institutions including any Australian companies with whom you have investments with that you are a foreign resident so that non-resident withholding tax can be deducted.

You acquired a local bank account in the foreign country.

All of your Australian bank accounts remain open and active.

You will not lodge any foreign income tax returns while living overseas.

Family and social connections

You have one dependent that lives overseas but is supported by you financially.

You have not maintained any professional, social or sporting connections with Australia.

You have established any professional, social or sporting connections in the foreign country.

You have not obtained any overseas qualifications.

You have not maintained any professional or occupational memberships in Australia.

Employment

You entered into a contract of employment where you are employed by a non-government Australian company, the foreign country company, which is a subsidiary or related party to an overseas registered company.

According to your employment contract, the following apply:

● You have been seconded to work in the foreign country for up to X years.

● You continue to be employed under Australian labour law.

● The employer is contributing superannuation to a nominated superannuation fund.

● Your salary is paid in Australian dollars into your Australian bank account.

● The employer will give you one month’s notice if they want to “extend the term of this engagement beyond the termination date”.

You are presently working in the foreign country under a work permit, which is in the process of been upgraded to a multi-year working visa.

You intend to work out your contract, and then review, depending on circumstances, whether or not you extend the contract.

Neither you nor your spouse ever been employed by the Commonwealth of Australia.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

You do not have a position or job being held for you in Australia but your current employment is through an Australian entity with your work location being in the foreign country.

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.

There are several factors outlined above which indicate that you have not ceased to be a resident of Australia, specifically:

● You have gone to the foreign country to live and work:

● You departed Australia on X 2017.

● You continue to be employed under Australian labour law.

● The employer is contributing superannuation to a nominated superannuation fund.

● Your current salary is paid by the foreign country in Australian dollars into your Australian bank account.

● Your employment contract is for X years, with the possibility of extension.

● Your visas were not supplied by an employer but your work permit in the foreign country is linked to your employment with the foreign employer.

● You spouse has accompanied you to the foreign country but continues to operate an online business in Australia.

● The accommodation provided by the employer is a furnished house.

● You home in Australia (owned with your spouse) has been rented furnished and stored personal effects.

● You plan to return to Australia once per annum during the term of the contract.

● You plan to return to Australia once your contract has terminated.

● You did not inform the Australian Electoral Commission or Medicare that you were departing Australia.

● You have investments in Australia and a bank account. You have told them your residency status is Australian.

● You acquired a local bank account at the foreign country.

For the period 1 July 2016 to the date you departed Australia: based on a consideration of all of the factors outlined above, you were a resident of Australia according to ordinary concepts as you maintained a continuity of association with Australia for that period.

For the period from the date of your arrival in the foreign country, based on a consideration of all of the factors outlined above, you ceased to be a resident of Australia according to ordinary concepts as you ceased to maintain a continuity of association with Australia.

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.

In your case, you were born overseas and then moved to another overseas country, where you obtained citizenship through marriage. You then moved to Australia and became a citizen of Australia. Your domicile of origin was a foreign country and you changed your domicile first to a second foreign country and then to Australia.

Your domicile will still be Australia while you are living and working in the foreign country as you have not indicated that you will be taking any legal steps to change your domicile to that country.

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.

For the period 1 July 2016 to X 2017, you were living and working in Australia. You were living with your spouse in in your jointly owned home. For this period you were a resident of Australia as you maintained you continuity of association with Australia.

For the period from X 2017:

● You have been living and working in the foreign country.

● You and your spouse are living in accommodation supplied by your employer.

● Your intention to live and work in the foreign country on an ongoing basis.

● Your home in Australia has been rented out.

Therefore, you remained a resident of Australia under the ‘domicile and permanent place of abode’ test of residency until X 2017. The Commissioner is satisfied you have a permanent place of abode outside of Australia from X 2017.

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 were present in Australia for the period X 2016 to X 2017, when you moved to the foreign country to live and work. You were in Australia for more than 183 days of the income year. Therefore you were a resident of Australia under the 183-day test for the income year ended 30 June 2017.

From X 2017, you will not been present in Australia for a total period of more than half of a year of income. Therefore you will not a resident of Australia under the 183-day test from 1 July 2017.

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 have stated that neither you nor your spouse is eligible to contribute to the PSS or the CSS. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test.

Your residency status

For the year ended 30 June 2017 you were a resident of Australia for taxation purposes under the 183-day test.

From 1 July 2017, you were 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 are not an Australian resident for taxation purposes.

Guidance

Lodging a tax return and paying tax

For 2017 income year, you will need to lodge an Australia tax return, declare worldwide income, subject to income tax at resident rates, including Medicare levy.

For the period you are a non-resident you only need to declare Australian source income, such as rental or interest income.

The tax treatment of your income in the foreign country is a matter for the local taxing authority.

Tax-free threshold if you are leaving Australia permanently

If you were a resident for part of the 2017 income year, you have a tax-free threshold of at least $13,464. The remaining $4,736 of the full tax-free threshold is pro-rated according to the number of months you were a resident:

$13,464 plus $4,736 multiplied by the number of months as a resident of Australia, divided by 12.

$13,464 + $4,736 × number of months as a resident of Australia

12

Note: you can include any month if you were in Australia for at least 1 day of that month.