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Edited version of your written advice
Authorisation Number: 1051386542991
Date of advice: 18 June 2018
Ruling
Subject: Residency
Question
Are you a resident of Australia for taxation purposes?
Answer
No
This ruling applies for the following period:
Year ending 30 June 20xx
The scheme commences on:
30 January 20xx
Relevant facts and circumstances
You and your spouse were both born in Country A.
You and your spouse are both citizens of Australia and Country A.
You and your spouse left Australia to migrate to Country B.
Your intention is to live there permanently.
You and your spouse purchased property in Country B.
You and your spouse sold your main residence in Australia prior to moving overseas.
Since moving to Country B you and your spouse lived in a holiday rental.
You and your spouse then moved to another holiday rental closer to the property you are both purchasing.
You and your spouse will stay there until you can move into the property.
You and your spouse have removed your names from the electoral role, cancelled your private health insurance and notified the banks you are non-residents in Australia.
You and your spouse have sold your car and have no plans to return to Australia.
You and your spouse have investment properties in Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 (ITAA 1997) Section 6-5
Income Tax Assessment Act 1936 (ITAA 1936) Subsection 6(1)
Income Tax Assessment Act 1997 (ITAA 1997) Section 995-1(1)
Reasons for decision
Summary
Prior to moving overseas, you and your spouse were residents of Australia for tax purposes. Based on the facts, you and your spouse are residents of Australia for income tax purposes for part of the year and non-residents from the day you both departed Australia.
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 you are no longer residing in Australia during the year in question, specifically:
● You moved overseas with the intention of staying permanently;
● You sold your main residence in Australia;
● You have investment properties in Australia; and
● You have purchased a bed and breakfast overseas in which you mean to live.
Based on the above, you are not residing in Australia from the date you departed, therefore, you are not residents 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.
You were both born in Country A and are Australian citizens. However, you have chosen to live in Country B, which you are currently eligible to do, therefore your domicile is Country B.
As your domicile is Country B you are not a 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 both non-residents of Australia under this test as you were not present in Australia for more than 183 days for the current 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.
Further information
If your status changes from resident to non-resident before the end of an income year you should answer 'yes' to the question 'Are you an Australian resident?' on your tax return for that year. This ensures you are taxed at resident rates for that part of the tax year you were resident in Australia.
Your non-residency for part of the year will be taken into account by a reduction in your tax-free threshold for that year. You will be entitled to a pro-rata tax-free threshold for the number of months you were an Australian resident during the income year. To do this, you will need to complete question A2 on your tax return ‘Part-year tax-free threshold’.
Non-residents of Australia do not have to pay the Medicare levy, so you can also claim the number of days that you were not an Australian resident during a tax year in your return as exempt days.
Your residency status
Based on the facts provided, we conclude that you and your spouse are not residents 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 year. You became non-residents of Australia from the date you departed to move overseas.