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Edited version of your written advice
Authorisation Number: 1051349418552
Date of advice: 29 March 2018
Subject: Residency – leaving Australia
Question
Am I an Australian resident for tax purposes whilst working overseas?
Answer
Yes
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). (It is not citizenship that we consider but residency for tax purposes.)
The terms ‘resident’ and ‘resident of Australia’, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:
● the resides test,
● the domicile test,
● the 183 day test, and
● the superannuation test.
If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.
The Commissioner expresses his view of what is meant by permanent place of abode outside Australia in Taxation Ruling IT 2650. It examines the factors to be taken into account in determining whether a person who leaves Australia temporarily ceases to be a resident during the absence. In IT 2650 the Commissioner states that a person leaving Australia would be considered to have maintained their Australian domicile, unless it is established that they have acquired a domicile of choice in another country. The entity situation is similar to the one in paragraph 31 of IT 2650. In this example, the taxpayer had a temporary work assignment of two years and intended to return to Australia at the end of that period. The tax payer spent his annual holidays in Australia, maintained his bank account and investment in Australia and for these reason the taxpayer was considered a resident for tax purposes.
As the entity meets the reside test the entity is an Australian resident for tax purposes.
This ruling applies for the following period
1 July 20XX to 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts
You are an Australian citizen who resided in Australia your whole life. You had no HECS/HELP debt and you had worked in Australia.
You moved overseas for work for about three years (with a definite end date) and will live in rental accommodation. You will return to Australia at the end of the contract and come back to Australia for a holiday perhaps once a year.
You will earn a salary which will be paid into an overseas bank account in foreign currency. You will pay taxes overseas and will have a foreign superannuation.
You will still have a bank account, an investment and a superannuation fund in Australia. You will continue to contribute to the investment fund and receive interest and dividends in Australia
You informed the Australian Electoral Commission and Medicare of your departure from Australia. You do not have a private health insurance.
You have no partner or dependants.
You will remain a member of an Australian association.
You have never been employed by the Commonwealth of Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 995-1
Income Tax Assessment Act 1936 subsection 6(1)