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Edited version of your written advice
Authorisation Number: 1051356837465
Date of advice: 13 April 2018
Ruling
Subject: Residency
Question
Are you are resident of Australia for taxation purposes?
Answer
No
This ruling applies for the following period:
Year ending 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
You are an Australian citizen.
You bought your first property in 20XX.
In 20XY you moved out of your property and began renting it out.
You moved to Country Y to be with your spouse.
You both live alone in a small unit owned by your spouse’s sister on a temporary basis.
You are required to vacate this property in June or July of this year as your niece will be moving in permanently.
You continued to do contract work for the your Australian employer while overseas until 20XA.
You are currently on leave from your position as a teacher at the school of languages.
Your only income is from renting your Australian property.
You plan to sell your property in Australia in before 1 July 2019.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1997 Section 118-145
Income Tax Assessment Act 1997 Section 118-170
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 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 ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.
The Commissioner may make reference to the following factors in determining whether a taxpayer is 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.
It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.
In your case, there are various factors that indicate that you were not residing in Australia during the years in question, specifically:
● You left Australia with no plans to return at a specific time;
● You retain various household items, personal possessions and bank accounts in Australia for use when you return;
● You have family in Australia;
● You moved out of your main residence in Australia and began renting out this property;
Although you retained a continuity of association with Australia, based on the above, you were not residing in Australia during the year in question.
Therefore, you were not a resident of Australia under the resides test of residency for the period of the ruling.
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.
You were born in Australia and remain a citizen, therefore, your domicile is Australia during the relevant period as there is no evidence to suggest you changed your domicile to Country Y while you were present in 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.
The Commissioner’s view on what constitutes a permanent place of abode is contained in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).
Where a taxpayer leaves Australia for an unspecified or a substantial period and establishes a home in another country, that home may represent a permanent place of abode of the taxpayer outside Australia.
However, a taxpayer who leaves Australia with an intention of returning to Australia at the end of a ‘transitory’ stay overseas would remain a resident of Australia for income tax purposes. It is the Commissioner’s view that an overseas stay in excess of two years may indicate that an individual can be considered to have a permanent place of abode overseas, subject to a consideration of all the other relevant circumstances applying to the taxpayer (paragraphs 25 and 27 of IT 2650).
In your case, you moved to Country Y to live with your spouse. You both live alone in a small unit owned by your spouse’s relative. You are required to vacate this property in June or July of this year as a relative will be moving in permanently.
The Commissioner is satisfied that you had a permanent place of abode outside Australia and therefore, you are a non-resident under this test.
The 183 day test
Under the 183 day test, a person is a resident of Australia if they are present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here.
You are not a resident of Australia under this test for the year as you were not present in Australia for more than 183 days during this year.
The superannuation test
An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.
You were not a resident under this test for the relevant years.
Your residency status
Based on the facts above, it is determined that you are a non-resident of Australia for tax purposes.