Edited version of your written advice

Authorisation Number: 1051438524469

Date of advice: 8 October 2018

Ruling

Subject: International residency

Question

Did you cease to be a resident of Australia for income tax purposes in Summer 20YY?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20YY

Year ended 30 June 20ZZ

The scheme commences on:

1 February 20XX

Relevant facts and circumstances

Your spouse received an offer of employment in Country A in Spring 20AA. This offer was for the role of a Manager. This position was full-time and for an unlimited duration.

Your spouse left Australia in Summer 20YY and commenced work the next day. You and your child left Australia one month later to join him.

You left Australia permanently to live, work and settle in Country A.

Your spouse’s company leased a two bedroom apartment for a period of 12 months and sub-leased this apartment to your spouse with the permission of the apartment owners.

On departure from Australia you engaged a local real estate agency to rent your family home but were unable to locate a suitable tenant due to the economic situation at that time. You considered selling the property but decided against this, again due to the economic situation in your local region. The property was left vacant until re-occupied by your child as noted below.

In Winter 20YY your child returned to Australia and resumed occupation of the family home with your permission. Your child lived there rent free while studying at College to prepare for further studies at University. This was an informal arrangement with the parents.

Upon returning to Australia your child obtained basic furniture from other family members sufficient for him to occupy the family home, which then became unavailable for rent.

You sold or gave away most personal effects before moving to Country A. When you returned to Australia you were therefore obliged to purchase new furniture in order to re-occupy your family home. You also shipped your furniture from Country A back to Australia to assist in re-furnishing your family home when you returned.

You sold your family cars before departing Australia.

You lodged as a part-year resident in 20YY i.e. as a non-resident from Summer 20YY. You also noted this as a final return and a new address in Country A.

You cancelled your internet connection, informed the Electoral Commission of your departure and established direct debits to meet obligations with local service providers such as water, gas and electricity.

You retained your Medicare card and membership and did not inform Medicare that you had departed Australia.

You cancelled your private health insurance policy upon departure as you received medical cover through your husband’s employer. This employee health cover was lost upon your departure from the position in Country A.

You retained no social or sporting connections to Australia but did take membership of a local club which gave access to their facilities.

You established local bank accounts in Country A including debit cards. You retained your Australian bank account and a mortgage offset account. You were unaware that you were obliged to inform your bank of your departure from Australia and did not do so.

While overseas you held no Australian investments other than the family home which was listed for rent.

You retained your Australian driver’s license as it had been renewed for 5 years before employment in Country A was contemplated.

You were issued a temporary 2 year visa which was arranged by your spouse’s employer. These visas gave you the temporary right to live in Country A. Your employer cancelled your spouse’s visa (and therefore your visa also) in Winter 20ZZ as per Country A law. This required you both to leave the country within 30 days.

As a result of the above you were offshore from Summer 20YY until Winter 20ZZ. During this time you and your spouse travelled to Australia for brief visits. Your spouse visited Australia for X days in the 20YY year and Y days in the 20ZZ year. You visited Australia for Y days in the 20ZZ year.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

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, and

● 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides Test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year:

● Physical presence in Australia;

● Nationality;

● History of residence and movements;

● Habits and ‘mode of life’

● Frequency, regularity and duration of visits to Australia;

● Purpose of visits to or absences from Australia;

● Family and business ties with Australia compared to the foreign country concerned; and

● Maintenance of a place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

In Landy v FC of T 2016 ATC 10-435;[2016] AATA 754, the taxpayer took on a supervisory role at an oilfield in Oman that lasted 21 months. On or before departure, he cancelled his Medicare, notified his private health insurance fund, requested his name be removed from the electoral roll and completed an outgoing passenger card indicating that he was leaving Australia permanently. However, throughout his employment in Oman he financially supported his wife in Australia, garaged his two motor vehicles at her home, maintained a joint bank account with his wife, maintained his offices as director and secretary of an Australian company (his wife being the other director and shareholder) and resumed living with his wife on his return. The AAT found that the taxpayer's lack of severance of connections with Australia, and the lack of establishment of enduring and lasting living ties with Oman, required a conclusion that the taxpayer had not ceased to be a resident of Australia as ordinarily understood.

In your case, you are a citizen of Australia who departed Australia in Summer 20YY with the intention of residing overseas permanently. You returned to Australia for brief visits. Based on the information provided these visits to Australia totalled less than X days, mainly for family occasions and health matters.

You departed Australia in Summer 20YY to join your spouse in Country A where you occupied your newly established abode.

You are not a resident for tax purposes under the resides test after departure. Before this date you are considered to have maintained an enduring association with Australia as you had an abode in Australia which continued to be occupied by yourself and your child.

The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

“Domicile” is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person’s domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you are a citizen of Australia. You have left Australia and have chosen to live in Country A.

You have not abandoned your domicile in Australia and acquired a domicile of choice in Country A as you do not yet have the right to reside permanently in that country. This is because you have not, as yet, been issued a visa that will allow you or to remain there indefinitely.

Permanent place of abode

A person’s ‘permanent place of abode’ is a question of fact to be determined in the light of all the circumstances of each case. (Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (Applegate))

In Applegate, the court found that ‘permanent’ does not mean everlasting or forever but it is to be contrasted with temporary or transitory.

The courts have considered ‘place of abode’ to refer to a person’s residence, where he lives with his family and sleeps at night.

Taxation Ruling IT 2650 Income Tax: Residency – Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual’s permanent place of abode. These factors include:

(a) the intended and actual length of the individual’s stay in the overseas country;

(b) any intention either to return to Australia at some definite point in time or to travel to another country;

(c) the intended and actual length of the individual’s stay in the overseas country;

(d) any intention either to return to Australia at some definite point in time or to travel to another country;

(e) the establishment of a home outside Australia;

(f) the abandonment of any residence or place of abode the individual may have had in Australia;

(g) the duration and continuity of the individual’s presence in the overseas country; and

(h) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer’s children, family ties.

Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors.

Based on all the facts, the Commissioner is satisfied you have not established a permanent place of abode outside Australia, in Country A. Therefore you are a resident for tax purposes under this test from the date you left Australia.

The 183 days test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

In your circumstances you have travelled to Australia for brief visits after your departure (for a total of X days). You are not a resident for tax purposes under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You are not a resident for tax purposes under this test.

Residency status

As you satisfy one of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a resident of Australia for income tax purposes for both the 2016/2017 and 2017/2018 financial years.