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Edited version of your written advice
Authorisation Number: 1051484926482
Date of advice: 4 April 2019
Ruling
Subject: Residency – Departing Australia
Question
Are you an Australian Resident for taxation purposes from 20XX?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2019
Year ended 30 June 2020
Year ended 30 June 2021
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You are an Australia citizen and are married to an Australian citizen with no dependants.
You departed Australia and commenced an international assignment with your Australian employer in Country A.
You currently hold a visa which is provided to you through your employer.
Your Australian employer provides furnished accommodation for your sole use and continues to pay your wages for the duration of your stay.
Your spouse did not accompany you to Country A.
You and your spouse own an Australian Assets. You retained an Australian bank account and continue to contribute to your Australian assets.
You are not enrolled on the Australian Electoral roll.
You hold Australian private health insurance.
You have set up a bank account in Country A.
You and your spouse are not eligible to contribute to the relevant Commonwealth super funds.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1997 Subsection 995-1(1)
Reasons for decision
Summary
Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).
The terms ‘resident’ and ‘resident of Australia’, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:
● the ‘resides’ test,
● the ‘domicile’ test,
● the 183 day test, and
● the superannuation test.
If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.
The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.
Detailed reasoning
The resides test
The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word ‘reside’. As the word ‘reside’ is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.
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 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.
Recent case law decisions have considered the following factors in relation to whether the taxpayer was 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 with Australia compared to the foreign country concerned; and
(viii) Maintenance of a place of abode.
Weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):
Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.
To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.
It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.
(i) Physical presence in Australia
A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):
Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.
In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period.
Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the ‘domicile and permanent place of abode’ test as an alternative argument.
The domicile test
If a person’s domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.
In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.
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 a person intends to live for the rest of his or her life. An intention to continue employment outside of Australia in the foreseeable future may mean in the meantime you are setting up a permanent place of abode elsewhere.