Edited version of your private ruling

Authorisation Number: 1012513848123

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for tax purposes from when you departed Australia?

No.

This ruling applies for the following periods

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on

1 July 2012

Relevant facts

You are an Australian citizen and country B is your country of origin.

You departed Australia to work in country A.

You have been granted a work permit to live in country A. You intend to apply for residency in country A.

You do not require a visa to enter country A as they have an agreement with Australia. Your work permit allows you to stay beyond the normal days of a tourist entry.

Your work permit allows you to stay in country A while you are employed, once you are granted residency you will not require the work permit anymore.

You intend to reside overseas for at least x years as this is your minimum contract.

You have been seeking an overseas opportunity for some time.

You plan to return to Australia to visit relatives for approximately y weeks in several months, time.

You do not hold a return airline ticket. You departed Australia on a one way ticket.

You have not returned to Australia since your departure.

In country A you have signed a long term lease agreement with the option for a further months on a property. Your family will live with you in this property.

Your employer provided you with a few weeks accommodation when you arrived in country A then you rented the apartment.

Your personal effects are in country A. You have a bank account in in country A. Your furniture is being moved from Australia to country A and you are not storing anything.

Your car in Australia is listed for sale and you will have approximately $ in your joint bank account to service your mortgage for the next couple of years. This is to avoid international transaction fees where possible.

You have worked overseas in the past while touring, but were still considered to be working and living in Australia. You have never made a full long term move like this move to country A before.

In Australia you lived in your family home which is being rented out by a real estate agent while you are away.

You are not receiving income from Australian sources.

You do not have a position or job being held for you in Australia.

Your entire family will accompany you to country A.

Your family will depart Australia approximately 1 month after you.

Your children will commence school in country A after their arrival.

It is likely that you will stay longer than your x year minimum contract.

Your employment contract is confidential and not available. You have a bond contract that proves not only your intent, but your requirement to stay for a minimum of x years and is a legal and enforceable document.

You were a member of the Australian Defence Force in the past.

You had a superannuation plan during your periods of service (not CSS or PSS) and they still hold a preserved benefit. You have not contributed to an Australian Government Super Fund since leaving the Defence Force.

You have friends and relatives in Australia and are not connected with any sporting associations here.

You have submitted an overseas notification and requested to be removed from the electoral roll as you are moving overseas indefinitely.

You have advised your bank in Australia that you are a non-resident so that the correct tax rates can be deducted.

You do not have investments with Australian companies.

Your family's private health insurance will be cancelled when they depart Australia.

You have not lodged a tax return in country A as you have only just arrived.

When completing the Australian Immigration outgoing passenger card you checked the 'Australian resident departing permanently' box.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision

Residency

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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

· 'resides' test (ordinary concepts test)

· domicile and permanent place of abode test;

· 183 day test; and

· Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test.

The resides (ordinary concepts) 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.

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 to different countries

(viii) Maintenance of Place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling TR 98/17 residency status of individuals who enter Australia, and Taxation Ruling IT 2650 residency status of individuals who temporarily live outside Australia.

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 relation to this the AAT has stated that:

"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."

You departed Australia and are employed in country A on a minimum x year contract and have a long term lease on an apartment there. When completing the Australian Immigration outgoing passenger card you checked the 'Australian resident departing permanently' box.

(ii) Nationality

The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case.

You are an Australian Citizen.

(iii) History of residence

You were born in Country B.

You were living in Australia prior to your departure and have never made a full long term move like this move to country A before.

You were living in your family home prior to your departure and have never made a full long term move out of Australia before.

(iv) Habits and "mode of life"

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.

"Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia." (TR 98/17).

· You have a long term month lease on an apartment in country A which can be extended

· your wife and children will be living with you in country A

· your children will commence school in country A shortly after your arrival; and

· you have removed your name from the electoral roll in Australia and have advised your bank that you are a non-resident so that you are taxed correctly.

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

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia.

You were living in your family home with your family until you left to live in country A.

You have not returned to Australia since you left, but you intend to return to visit relatives for a few weeks in some months, time.

(vi) Purpose of visits to or absences from Australia

You will be absent from Australia for at least x years under a work contract and long term lease in country A and will apply to become a resident there.

(vii) Family and business ties to Australia and the overseas country or countries

Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident.

Family

You have relatives in Australia and your spouse and children live with you in country A

Business or economic

You resigned from your employment in Australia to take up the opportunity in country A.

Assets

· You have a house in Australia which you rent out whilst you are in country A,

· You are selling your motor vehicle in Australia,

· You maintain your Australian bank account,

· You have moved your furniture to country A.

(viii) Maintenance of Place of abode

The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer.

You own a house in Australia which you rent out whilst you are in country A.

Summary

As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you have ceased to be a resident of Australia.

Specifically:

· you will be living in country A for a minimum of x years

· your family has accompanied you

· you have moved all of your furniture to country A

· you intend to apply for residency in country A

· when completing the Australian Immigration outgoing passenger card you checked the 'Australian resident departing permanently' box; and

· you have removed your name form the electoral roll in Australia and advised your bank that you are a non-resident.

Based on a consideration of all of the factors outlined above you are not a resident of Australia according to the resides (ordinary concepts) test as you do not maintain a continuity of association with Australia for the relevant periods.

The domicile test

If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

You are an Australian citizen so currently your Australian domicile remains unchanged. Once you have applied for residency in country A, your domicile of choice will have changed as you will be able to prove an intention to make your home indefinitely there. After you have applied for residency, your domicile will be country A.

Permanent place of abode

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 return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode;

i. the intended and actual length of the taxpayer's stay in the overseas country;

ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

v. the duration and continuity of the taxpayer's presence in the overseas country; and

vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Consideration of these factors

· you intend to remain in country A for a minimum of x years

· you intend to apply for residency in country A

· you have signed a long term lease agreement with the option for further months on a property in country A

· Prior to moving to country A you lived in your family home with your spouse and children, you have moved your personal effects to country A and rented out the property.

· You plan to return to Australia to visit relatives for approximately some weeks in some months time, but otherwise intend to live and work in country A

· You have removed your name from the electoral roll, cancelled your private health cover and advised your bank that you are a non-resident.

The Commissioner is satisfied that you have established a permanent place of abode outside of Australia prior to applying for residency in country A. You are not a resident of Australia under the domicile test from when you left Australia.

183 day test

Where a person is present in Australia for 183 days or more 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.

As you will not be in Australia for a period of 183 days or more during the relevant income year, you are not a resident under the 183 day test.

Superannuation fund tests

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You are not eligible to contribute to the CSS or PSS. Further, your spouse has never been an employee of the Australian Government and you are over 16 years of age. Therefore, you are not a resident under the super test.

Conclusion

You are not a resident of Australia for tax purposes under any of the tests for the relevant periods, therefore, you are not a resident of Australia for tax purposes from when you left Australia under subsection 6(1) of the ITAA 1936.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).