Edited version of your written advice

Authorisation Number: 7925123987916

Date of advice: 31 January 2018

Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes whilst your spouse and dependents remain in Australia?

Answer

Yes

Question

Are you a resident of Australia once your spouse and dependents join you?

Answer

No

This ruling applies for the following periods:

Financial year ending 30 June 2018

The scheme commenced on:

1 July 2017

Relevant facts and circumstances

You are not an Australian citizen.

You currently live in a home which you own in Australia.

You currently live with your spouse and children in Australia

You wish to move to overseas permanently with no intention to return to live

As an Australian permanent resident visa holder, you are allowed to live and work in destination location indefinitely.

You have resigned from your Australian employment.

You start full time employment overseas in 2018, the foreign employer has no relationship to your former Australian employer.

You will initially lease a home when you arrive overseas.

Your personal belongings will be moved with you.

You expect to return to Australia to visit family and expect to be in Australia for 1 month a year, as you have only 4 weeks annual leave a year.

You have no history of travel to overseas location.

The frequency of your return visits to Australia from overseas will most likely be during school holidays for 1 week. During these visits you will stay in your former residence in Australia.

Your home in Australia will be occupied by your spouse and children whilst you are overseas. Your family expect to stay in Australia until your eldest child finishes schooling, thereafter the remaining family members living in Australia will relocate overseas to live with you. This will be at the end of the 2018 Australian school year.

Upon arrival overseas you will obtain a mobile phone, join a health insurance fund, lease a home to reside in and be responsible for utilities such as electricity, gas and internet.

You expect at a later time to purchase a home and motor vehicle overseas.

You have not yet established any assets overseas, as you have not lived there yet. Once you settle down overseas and understand the property market you will purchase a home.

Your assets in Australia include interest in a residential property, two motor vehicles registered to you, superannuation and shares.

All members of your family subscribe to Australian mobile phones under your name. All utilities (i.e. water, electricity, gas and internet) will remain under your name.

You are not a contributing member of an Australian Commonwealth Government superannuation fund.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for Decision

These reasons for decision accompany the Notice of private ruling.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our 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' and 'permanent place of abode' test,

● the 183 day test, and

● the Commonwealth superannuation fund 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.

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. 3^rd 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'.

In considering the definition of ‘reside’, the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term ‘reside’ should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word ‘reside’.

The question of whether an individual ‘resides’ in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:

(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.

The 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.

(i) Physical presence in Australia

It is important to note that 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.

Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62):

Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1.

You will be physically present in Australia for approximately 1 to 4 months a year. This is indicative of a physical connection to Australia that will continue past your initial date of relocation.

(ii) Nationality

In your case, you were born in outside Australia and are not an Austraian citizen. You are currently present in Australian on a permanent resident visa. You will maintain an Australian permanent resident visa in order to establish yourself in the overseas location. You will in effect be residing in Australia only for periods when you are physically present in Australia.

(iii) History of residence and movements

You have resided in Australia for the last two decades and have expressed an intention to move to the new location. You have no history of movements to the new location.

(iv) Habits and ‘mode of life’

You intend to live and work overseas indefinitely. You will establish yourself upon arrival by entering into a lease and commencing employment.

You will maintain your home, utilities and assets in Australia.

Your dependent family will remain in Australia until late 2018.

You are gradually relocating to the new location but you are doing so with a continued association with Australia.

Your habits and mode of life are shared between Australia and the new location.

(v) Frequency, regularity and duration of visits to Australia

You are likely to return to Australia for a week during the school holiday periods. These return periods may increase in frequency and duration in the event of family illness.

This pattern of return is indicative of a transitional living arrangement between Australia and the new location. The proposed minimal movements are not frequent though they do not demonstrate a break of ties with Australia.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is to establish yourself permanently in the new location and commence employment.

The purpose of your visits to Australia are to be with your family.

(vii) Family, business and financial ties

Family

Your spouse and two children will remain in Australia once you move to the new location.

Your parent and sibling live overseas.

Business or economic

You will commence employment overseas in 2018. You have resigned from your Australian employment.

Assets

Your assets in Australia comprise of an interest in property, motor vehicles registered to you, your superannuation and some shares. You will start to acquire assets once you arrive in the new location.

Your family, business and financial ties will be shared between Australia and the new location.

(viii) Maintenance of a place of abode in Australia

You will maintain a house in Australia for your family members. You will eventually purchase a home in the new location. Your association with Australia is stronger for this test.

Summary of the resides test

As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term ‘reside’ should be given a wide meaning.

In your case, although you intend to be physically absent from Australia for at part of the year, there are various factors that indicate that you have not ceased to be a resident of Australia. These are primarily:

● You will maintain a physical presence in Australia throughout the year.

● Your migration status in the new location whilst inherently dependent on your Australian visa does not tie you to Australia.

● You have an established pattern of residence in Australia that you will not completely sever.

● You will be maintaining your family in Australia whilst you are in the new location

● You will maintain a home in Australia.

Based on the above, you will retain a continuity of association with Australia while you are overseas and will be residing in Australia according to the ordinary meaning of the word.

Therefore, you are a resident of Australia under the ‘resides’ test of residency.

Your residency status

If any one of the four residence tests are met, an individual will be a resident of Australia for taxation purposes.

As you met the resides test you are a resident of Australia for tax purposes.