Edited version of private advice

Authorisation Number: 1051769537170

Date of advice: 20 October 2020

Ruling

Subject: Residency

Question

Are you a tax resident after departing Australia in late 20XX?

Answer

No

Question

Is your overseas income assessable in Australia?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

Year ended 30 June 2019

Year ended 30 June 2020

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You are an Australian citizen who departed Australia in late 20XX to start your career in Country A.

You do not have an intention to return to Australia in the foreseeable future as your family and social relationships are all there, you have a stable and improving career in that country and pandemic travel restrictions make a return to Australian impracticable.

You visited Australia mainly for holidays on several occasions. You provided a report showing that your visits accumulated to the following days spent outside Australia -

You travelled on your Australian passport. You also hold a Country A working visa which is valid until August 20YY. This working visa can be renewed.

Upon departure your intention was to live and work in Country A. You sold your household effects and took most of your personal possessions when you departed.

You informed the Australian Electoral Commission that you had departed Australia. You are uncertain whether you formally withdrew from Medicare.

You did not hold health insurance when in Australia.

You lodged Australian tax returns for the 20XX to 20YY years and did not claim Australian residency in those returns.

In Country A you are living in your own property. When you lived in Australia you lived in rented accommodation.

When you departed Australia, you maintained an Australian bank account. You recently bought an investment property and have arranged for the real estate agent to collect and redirect your mail.

You acquired a local driver's license and a local bank account.

You did not establish professional, social or sporting connections while in Australia and have not done so in Country A either.

Initially you were employed by a family trust. However recently you have switched and are now employed as an assistant to the manager of a local company. You mainly assist the manager in implementing company business strategies, develop business plans and management policies.

You have never been employed by the Australian Commonwealth government and do not belong 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', regarding 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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides Test

When considering the resides test the following factors are normally considered:

• physical presence
• intention or purpose
• family or business ties
• maintenance and location of assets
• social and living arrangements

In your case, you are a citizen of Australia who departed Australia in late 20XX.

During your time overseas you travelled to Australia on several separate occasions mainly for holidays.

This subject is addressed in Taxation Ruling 98/17 (TR98/17) Income tax: residency status of individuals entering Australia. At paragraphs 20 and 21 it states -

20. All the facts and circumstances that describe an individual's

behaviour in Australia are relevant. In particular, the following factors

are useful in describing the quality and character of an individual's

behaviour:

-        intention or purpose of presence;

-        family and business/employment ties;

-        maintenance and location of assets; and

-        social and living arrangements.

21. No single factor is necessarily decisive, and many are

interrelated. The weight given to each factor varies depending on

individual circumstances.

Your intention upon departure was to work in Country A to further your career. You do not have an intention to return to Australia to live.

You did not establish professional, social or sporting connections in Country A or maintain those in Australia. Your living arrangements in Country A was to occupy your own property.

You are not considered a resident for tax purposes under the resides test after departure. You are not considered to have maintained an enduring association with Australia as you do not have an abode in Australia which remains available to you.

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 been granted, nor have you actively sought, permanent residency in any other country.

You have not abandoned your domicile in Australia and acquired a domicile of choice overseas as you do not yet have the right to reside permanently in Country A. This is because you have not yet actively applied for, nor 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 of 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.

In your case it is considered that you have established a permanent place of abode outside of Australia as:

-        You do not have a residential home in Australia, which you own, and which remains available to you.

-        You have set up a home in Country A which you own.

-        You have visited Australia numerous times since your departure, but these visits are mainly for holidays.

You intended to live in Country A for a considerable and indeterminable time. This intention has been borne out by subsequent events. You have abandoned your residence in Australia and your limited connections to Australia. While you do have an investment property in Australia, this is not a family home.

The duration and continuity of your presence overseas supports the argument that you established a permanent place of abode outside Australia.

Consequently, the Commissioner is satisfied that you have a permanent place of abode outside Australia, and you are therefore a non-resident under the domicile test of residency during the period in Country A.

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 returned to Australia on several occasions for holidays. You have not been onshore for more than 183 days in any of the income years. Therefore, 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 none of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a non-resident of Australia for income tax purposes after departing Australia.

Source of Funds

Your current employment contract was drafted in Country A and abides by local laws. You entered into this contract in Country A and your duties require you to work in there.

In your previous employment any customer contact was with customers in Country A.

Your pay is paid into a local bank account by a Country A based company.

Taking these facts into account it is considered that your overseas income is not assessable in Australia as it has an overseas source and all elements of this income relate to an overseas country.