Edited version of private advice

Authorisation Number: 1051704475986

Date of advice: 06 July 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian citizen who departed Australia in mid-20XX to take up a position in Country A.

However, in Spring 20XX you resigned for family reasons and returned to Australia. Your family did not accompany you overseas. You visited Australia for family reunion purposes on three occasions. These were from A to B in 20XX, again on C to D in 20XX and finally from E to F in 20XX.

You were not granted permanent residency in Country A but worked there on a 2-year work visa which was arranged by your employer. This visa provided a right to work and live there but had to be renewed in order to allow you to continue working in that country.

Upon departure your intention was to work overseas for some time, perhaps 2 to 5 years, and then to return to Australia.

You did not inform the Australian Electoral Commission or Medicare that you had departed Australia. You received advice suggesting that you should not withdraw from Medicare. You also voted in an Australian election while living overseas.

You cancelled your private health insurance when you departed Australia.

You also lodged an Australian tax return for the 20XX year and claimed Australian residency in that return; for the period immediately prior to your departure.

You rented a local flat for 1 year and extended the lease for another year.

When you departed Australia, you maintained your normal Australian assets including bank accounts, house, investments and a vehicle. You left your household and personal effects in your house in Australia in the care and custody of your wife and daughter.

During your time working in Country A you received investment income from bank accounts and investments. You advised Australian financial institutions of your departure so that withholding tax could be collected.

You did not acquire assets while overseas and did not lodge tax returns there.

You did not maintain any professional, social, sporting or occupational memberships in Australia. Similarly, you did not establish such memberships in Country A.

While overseas you remitted X% of your income to your wife to provide financial support for her and your child.

Neither you nor your wife 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', 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 mid-20XX.

During your time overseas you travelled to Australia on 3 separate occasions to maintain family relationships.

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 overseas for some time, perhaps 2 to 5 years. Your intention was not to depart Australia permanently and establish a new life in another country.

You maintained strong family ties with Australia and nurtured these ties with regular visits.

You maintained a home and most of your assets in Australian and have established what could be described as a transient presence in Country A before leaving that country to maintain family relationships.

You did not establish professional, social or sporting connections in Country A or maintain those in Australia - apart from your family relationships. Your living arrangements in Country A were rental accommodation only and you did not establish other long-term connections in that country.

You are considered a resident for tax purposes under the resides test after departure in 20XX. You are considered to have maintained an enduring association with Australia as you have an abode in Australia which remains available to you and have established only a transient presence overseas.

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 in Country A as you do not yet have the right to reside permanently in that country. 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 not established a permanent place of abode outside of Australia as:

·   You left a residential home in Australia, which you own, and it remains available to you.

·   You have not and will not set up an established home with family in Country A despite substantial time to do so.

·   You have visited Australia numerous times since your departure to maintain family connections

Although you intended living overseas for a considerable and indeterminable time your intention has not been borne out by subsequent events. You have not abandoned your residence in Australia nor your connections to Australia. Your Australian residence is still available to you, and you have retained a durable association with Australia, through your family who remained in Australia.

The duration and continuity of your presence in Country A does not support the argument that you established a permanent place of abode outside Australia. Rather, your arrangement suggests limited duration and relatively frequent absences from that country.

You have maintained a strong association with Australia through family relationships, continuing to maintain Australian assets, continuing to vote in an Australian election, not advising Medicare of your departure and maintaining household and personal effects in Australia. You also provided substantial financial support to your Australian family. These suggest that you have established a transient abode overseas.

Consequently, the Commissioner is not satisfied that you have a permanent place of abode outside Australia, and you are therefore a 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 permanently in November 2019. You are not a resident for tax purposes under this test during your time in Country A.

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 two of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you remain a resident of Australia for income tax purposes after departing Australia.

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