Edited version of private advice

Authorisation Number: 1051759967795

Date of advice: 25 September 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

General

You were born in Australia and you are a citizen of Australia.

You are not a citizen of any other country.

You moved to Country A in mid-20XX where you entered that country on a X year Visa.

Your initial intention was to return home permanently to Australia within two years. However, this intention changed as you approached mid- 20XX, where you decided to stay in Country A for a longer period.

You have currently been living in Country A for X years.

Since you arrived in Country A you have been renting private accommodation along with working in various cities in Country A in temporary contracts via a recruitment agency in your profession.

You have never had a permanent job in Country A or an address in Country A with any permanency.

You have had two extensive periods (approximately three months each - in mid-20XX and mid-20XX) plus a couple of shorter periods (one to two weeks in early- 20XX and mid-20XX) when you were neither working or renting, but rather you were travelling around various countries across Continent A.

Since you have arrived in Country A you have returned to Australia twice as follows:

·         Visiting family and friends in early in 20XX for a few weeks.

·         Visiting family and friends in early 20XX for a couple of months, however whilst you were in Australia during this period you were between work contracts in Country A and you also worked in Australia during this time, as you did not have enough savings to sustain your living expenses.

You are currently uncertain as to whether you will remain living permanently in Country A. However, you think that it is likely that you will be returning to Australia to live in the next couple of years.

You did not inform the Australian Electoral Commission or Medicare that you were departing Australia.

You have cancelled your Australian private health insurance policy.

When completing incoming and outgoing passenger cards you noted your status as a resident returning to Australia, also noting your parent's home address.

During the period you have spent overseas you have completed a tax return in the 20XX-XX financial year where you lodged as a resident of Australia.

Accommodation

You do not own a home and you have never owned a home in Australia. You have always rented properties in which to live in.

You do not own a home in Country A, and you have always rented privately whilst you have been living in Country A (never formally on a lease).

You have a current home address in Country A.

Assets

You have retained your Australian bank account and credit card.

You have not made any investments in Australia while you have been overseas.

Your household effects in Australia were either sold or donated to charity before you left for Country A.

Your personal effects in Australia were stored at your parent's house in Australia before you left for Country A.

You have not advised any Australian financial institutions including Australian companies with whom you have investments with that you are a foreign resident.

Since living in Country A, you have done the following:

·         Set up a bank account;

·         Set up mobile phone contracts;

·         Purchased a campervan;

·         Purchased bicycles; and

·         Purchased household effects such as bedding and kitchenware.

Family and social connections

You do not have any dependants.

You have maintained friendships in Australia, along with some professional connections.

You have established professional connections in Country A along with social connections.

You hold a driver's licence in Country A.

Employment

You have obtained work within the health sector (through various agencies) following arriving in Country A.

The work is generally short-term contracts ranging from a few days to several months, where the average contract length is approximately 3 months.

Your employment is constantly extending via the nature of your work - you extend your employment every time you secure a new contract which is usually in a different city to the previous contract.

Neither you nor your spouse have ever been employed by the Commonwealth of Australia.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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.

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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.

The resides (ordinary concepts) test

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'.

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 Ruing IT 2650 - Income tax: residency - permanent place of abode outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

In deciding cases of residency, the courts and tribunals have noted that a person does not necessarily cease to be a resident because he or she is physically absent from a place. Instead, the test is whether the person has retained a continuity of association with a place, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation [2002] ATC 2088).

In your case:

·         You have been permanently living and working in Country A since mid- 20XX.

·         Your initial intention was to return home permanently to Australia within two years. However, this intention changed as you approached mid-20XX, where you decided from that point that you would stay living in Country A for a longer period.

·         You entered into Country A on a X- year Visa.

·         You are currently uncertain as to whether you will remain living permanently in Country A. However, you think it is likely that you will be returning to Australia within the next couple of years.

·         Since arriving in Country A, you have only returned to Australia twice for relatively short periods to visit family and friends (in early 20XX and early 20XX).

·         Your only other notable absences from Country A since you have been living there were for holidays where you were travelling around various countries across Continent A, with these being two periods of approximately three months (in mid-20XX and mid-20XX), plus two periods of one to two weeks (in early-20XX and mid-20XX).

·         You are currently living in a private rental property in Country A.

·         You do not have any dependants.

Accordingly, you are not residing in Australia under ordinary concepts and you are not a resident under this test.

As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

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.

This intention needs to be demonstrated in a legal manner by way of becoming a permanent resident or citizen of another country, for example.

Your domicile is Australia because your country of origin is Australia and you are still an Australian citizen. You have not taken any steps to gain permanent residency status in Country A.

Therefore, you will be a resident of Australia unless the Commissioner is satisfied that you have established a permanent place of abode outside of Australia.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

(a)   the intended and actual length of the taxpayer's stay in the overseas country;

(b)   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;

(c)   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;

(d)   whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(e)   the duration and continuity of the taxpayer's presence in the overseas country; and

(f)    the 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.

The Commissioner is satisfied that your permanent place of abode is in Country A because:

·         You have lived and worked on a continuous basis in Country A since mid-20XX.

·         Your initial intention was to return home permanently to Australia within two years. However, this intention changed as you approached mid-2019, where you decided from that point that you would stay living in Country A for a longer period.

·         You entered into Country A on a X year Visa.

·         You are currently uncertain as to whether you will remain living permanently in Country A. However, you think it is likely that you will be returning to Australia within the next couple of years.

·         You live in private rental accommodation in Country A.

·         Since arriving in Country A, you have only returned to Australia twice for relatively short periods to visit family and friends (in early 20XX and early 20XX).

·         Your only other notable absences from Country A since you have been living there were for holidays where you were travelling around various countries across Continent A, with these being two periods of approximately three months (in mid-20XX and mid-20XX), plus two periods of one to two weeks (in early-20XX and mid-20XX).

·         You hold a driver's licence in Country A.

·         You do not own any property in Australia.

·         You do not have any dependants.

As such you are a non-resident under this test.

The 183-day 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.

The Commissioner is satisfied that will not be in Australia for more than 183 days during the relevant financial years.

The Commissioner is also satisfied that your usual place of abode is outside Australia.

The Commissioner is also satisfied that you do not intend to take up residence in Australia.

You are a non-resident under this test.

The superannuation test

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.

Neither you nor your spouse have ever been employed by the Commonwealth of Australia.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not a resident under this test.

Your residency status

As you are not a resident under any of the four tests of residency you are not a resident of Australia for income tax purposes 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).