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Edited version of your written advice
Authorisation Number: 1051384877980
Date of advice: 12 June 2018
Ruling
Subject: Residency
Question 1
Are you a resident for taxation purposes in Australia from when you left to work overseas?
Answer
Yes
Question 2
If you are an Australian resident for tax purposes while living and working overseas, will you have to pay the 2% Medicare levy?
Answer
Yes
Question 3
If you are not an Australian resident for tax purposes while living and working in overseas, is there a limit on how many days per income year you can spend in Australia visiting your family?
Answer
N/A
Question 4
If you are not an Australian resident for tax purposes while you live and work full time in overseas, is there a limit on how much money per income year you can transfer to your wife’s bank account in Australia?
Answer
N/A
Question 5
If you are an Australian resident for tax purposes while living and working full time in overseas, will you need to pay income tax on your living allowance?
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 20xx
Year ending 30 June 20xx
Year ending 30 June 20xx
Year ending 30 June 20xx
The scheme commences on:
1 July 20xx
Relevant facts and circumstances
You were born in Country A and are a citizen of Country B.
You lived overseas for a number of years.
The company you worked for overseas moved you and your family back to Australia where you planned to live permanently.
You were informed by the Australian company you worked for that your position would be made redundant.
You were unable to find further employment in Australia and applied for a job overseas.
You entered into a contract to work in Country C as a consultant.
You left Australia.
You receive a monthly living allowance to cover the cost of utilities, food, fuel and toiletries.
The company in Country C provide health insurance for you.
You have been provided with an apartment and company vehicle at no cost to you.
Your spouse and child remained in Australia in your main residence.
You intend visiting your family in Australia approximately 3-4 times per year.
Relevant legislative provisions
Income Tax Assessment Act 1997 (ITAA 1997) Section 6-5
Reasons for decision
Summary
Prior to taking up this position overseas, you were a resident of Australia for tax purposes. Due to a decrease in job opportunities, you accepted a position overseas while your family remained in Australia, therefore, not breaking your ties as resident for tax purposes. Based on these facts you are a resident of Australia for income tax purposes.
Detailed Reasoning
Residency
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 still residing in Australia during the year in question, specifically:
● You did not move overseas with the intention of staying permanently;
● You do not wish to continue working overseas;
● Your family remained in Australia; and
● You maintain a place of abode in Australia.
Based on the above, you were residing in Australia from the date you departed as your family did not join you overseas, therefore, you are a resident of Australia under the resides test of residency for the period you are overseas.
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 and you are a citizen of Country B, there is no evidence to suggest that you changed your domicile to Australia or Country C while you are based in those countries.
Therefore, your domicile is still Country B during the relevant periods.
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.
In your case, there are various factors that indicate that you had a permanent place of abode outside Australia during the relevant years:
● You did not move overseas with the intention of staying permanently;
● Your overseas employer pays for your accommodation, car and health insurance;
● You do not wish to continue working overseas;
● Your family remained in Australia; and
● You maintain a place of abode in Australia.
Based on the above, the Commissioner is satisfied you do not have a permanent place of abode outside Australia during the relevant period. Therefore, you are a resident of Australia under the domicile and permanent place of abode test of residency for the period of the ruling.
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 a non-resident of Australia under this test as you were not present in Australia for more than 183 days in previous years.
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 you have provided, we conclude that you are a resident of Australia for taxation purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936 for the relevant years. When you departed, your family remained in Australia therefore not breaking your residency connection.
As a resident of Australia for tax purposes, you are required to declare your worldwide income on your tax return, this includes any fringe benefits and allowances. If you have paid foreign tax in another country, you may be entitled to an Australian foreign income tax offset, which provides relief from double taxation.
Generally, a person is considered a non-resident of Australia if they and their whole family relocate overseas with no intention of returning, they sell their main residence, cancel bank account’s, remove themselves from the electoral roll and from Medicare, having no further connection with Australia.