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Edited version of your written advice
Authorisation Number: 1051357650482
Date of advice: 5 April 2018
Ruling
Subject: Residency
Question
Are you a resident of Australia for taxation purposes?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commences on:
1 July 2014
Relevant facts and circumstances
Your country of origin is Country A.
You migrated permanently to Australia in June XXXX.
You were granted a resident return visa (subclass 155) as a non-citizen permanent resident of Australia.
You established a Self-Managed Super Fund (SMSF) on XX/XX/XXXX and retired.
You have travelled extensively overseas resulting in being offshore for more than 183 days at various times.
On XX/XX/XXXX you sold your Australian residence.
You bought an apartment in Country A which you are renovating so you have a place to stay while there.
You left Australia on XX/XX/XXXX and have not yet returned.
You rented or stayed with friends until you left Australia.
You have stored your household and personal effects with friends for use when in Australia.
You have retained your bank accounts and remain on the electoral role in Australia.
You have been lodging your tax returns as a resident for tax purposes.
Assumption(s)
N/A
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)
Anti-avoidance rules
The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the MEI low risk PART IVA list as specified in ORCLA.
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 remain on the Australian electoral roll;
● You have family in Australia;
● You sold your main residence in Australia and bought a property in Country A to renovate and live in while overseas, therefore, maintaining a place of abode outside Australia.
Although you retained a continuity of association with Australia, based on the above, you were not residing in Australia during the years 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.
In your case, your domicile of origin is Country A as there is no evidence to suggest that you changed your domicile to Australia while present here. Therefore, your domicile was still Country A during the relevant period.
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 went to Country A to take advantage of the public health system that you and your spouse are entitled to, and to travel to other countries while still healthy enough to do so. You purchased a property in Country A to renovate and live in while overseas.
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 were not a resident of Australia under this test for the years in question as you were not present in Australia for more than 183 days during those years.
For the year ending XXXX, although you were in Australia for more than 183 days, your usual place of abode is outside Australia; therefore, you are a non-resident for 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 during the periods ending 20XX and 20XX you are a non-resident of Australia for tax purposes, for the period ending 20XX even though you were present in Australia for more than 183 days, you still maintained a residence in Country A while staying with friends and family in Australia, therefore, for this period you are a non-resident.