Edited version of private advice

Authorisation Number: 1051777556316

Date of advice: 07 December 2020

Ruling

Subject: Residency

Question

Were you a resident of Australia for taxation purposes for the period of the ruling?

Answer

No.

This ruling applies for the following period:

Income year ended 30 June 2016

Income year ended 30 June 2017

Income year ended 30 June 2018

Income year ended 30 June 2019

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You accepted employment with the employer to be located in foreign country A.

The first day of employment with the employer per the contract of service was scheduled for a date.

The contract was for a period of X years with option to renew at completion of the contract. You renewed the contract for a second period.

You terminated your residential apartment lease in Australia.

You sold or gave away all household furniture and appliances and sold your car. You kept nothing in storage.

Your intention was to make a life in foreign country A.

You departed Australia and went to foreign country B for several months as contract with the employer did not commence until a date.

On arriving in foreign country A you leased an apartment for a period of X years, purchased furniture and a motor vehicle and made a life in foreign country A.

You were given a temporary resident card by the Government of foreign country A.

You paid tax in foreign country A or your salary.

You were offered a contract renewal by the employer for a further period. You accepted the renewal.

You renewed your apartment lease in foreign country A.

You travelled to Australia on a few occasions for a few weeks during your time in foreign country A. The purpose was to visit family and friends in Australia.

You returned to Australia on a date.

The reason you returned to Australia was family related.

While in foreign country A, you had undertaken enquiries into moving from foreign country A to foreign country C.

You are not a member of the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

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

Reasons for decision

Summary

You were not a resident of Australia for taxation purposes during the period of the ruling.

Detailed reasoning

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, if you are a foreign resident, your assessable income includes only income derived from an Australian source (subsection 6-5(3) of the ITAA 1997).

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. These tests are:

1. the resides test

2.    the domicile test

3.    the 183-day test

4.    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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

1. 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.

In your case, you were residing in Australia until your date of departure. You departed Australia on and went to foreign country B for several months before you took up residence in foreign country A.

(ii) Nationality

You are an Australian citizen.

(iii) History of residence and movements

You lived and worked in Australia prior to leaving Australia to take up your employment contract in foreign country A. You spent several months in foreign country B before you took up residence in foreign country A.

(iv) Habits and 'mode of life'

Your intention was to live and work in foreign country A for the period of your renewable employment contract. The contract was for X years and was extended to X years.

You established a residence in foreign country A in rented accommodation. The accommodation was not provided for you.

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

You travelled to Australia on a few occasions for a few weeks stay during your time in foreign country A. The purpose was to visit family and friends in Australia.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia was to live and work in foreign country A on an employment contract for X years, extended to X years. Your visits to Australia were short term visits to family and friends.

(vii) Family, business and financial ties

Family

You lived by yourself in foreign country B and then in foreign country A. Your adult child lives independently of you in Australia.

Business or economic

You took up an employment contract in foreign country A for X years, extended to X years. You had no plans to return to live and work in Australia during that period and had no job being held for you in Australia.

Assets

You terminated your residential apartment lease in Australia. You sold or gave away all household furniture and appliances and sold your car. You kept nothing in storage.

You had no assets in foreign country A.

(viii) Maintenance of a place of abode

In foreign country A you lived in accommodation you rented yourself.

Prior to your departure, you terminated your residential apartment lease in Australia..

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, there are various factors that indicate that you had ceased to be a resident of Australia during the period of the ruling.

You moved to foreign country A to take up employment on a renewable contract, which you renewed for a second period. You established a home there in accommodation you rented yourself. You made short trips to Australia. You maintained no assets in Australia.

Based on the facts of your case, the Commissioner accepts that you ceased residing in Australia according to the ordinary meaning of the word 'reside' and you did not retain a continuity of association with Australia for the period of the ruling.

Therefore, you were not a resident of Australia under the 'resides' test of residency for the period of the ruling.

2. The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

The concept of Domicile was discussed in the Marriage of Emson> (1980) 5 Fam LR 662:

A person may abandon his domicile of origin and acquire a domicile of choice but in order to establish a change of domicile there must be clear evidence of an intention to abandon the domicile of origin and to make a new permanent home in the country to which the person has removed. In my view a person cannot be said to acquire a new domicile until there has been a firm intention of establishing a permanent residence in another country and also the confirmation of that intention by actual residence in that country.

Declarations as to intention are rightly regarded in determining the question of a change of domicile, but they must be examined by considering the person to whom, the purposes for which, and the circumstances in which they are made and they must further be fortified and carried into effect by conduct and action consistent with the declared expression:

Ross v Ross [1930] AC 1 at 6-7 per Lord Buckmaster... Where the court finds that at a relevant point of time there is a conflict between the actual conduct of the party concerned and the verbal expression of his intention doubtless the court will in most cases prefer the act to the word - as an ancient proverb puts it: "what you do speaks so loudly that I cannot hear what you say."

Further, in Fremlin v Fremlin (1913) 16 CLR 212; [1913] HCA 25 (Fremlin v Fremlin) Per Barton J:

In Winans v. Attorney-General, Lord Halsbury L.C. said:-"Now the law is plain, that where a domicile of origin is proved it lies upon the person who asserts a change of domicile to establish it, and it is necessary to prove that the person who is alleged to have changed his domicile had a fixed and determined purpose to make the place of his new domicile his permanent home." In the much older case of Udny v. Udny Lord Westbury said: -"Domicile of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. This is a description of the circumstances which create or constitute a domicile, and not a definition of the term. There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation. It is true that residence originally temporary, or intended for a limited period, may afterwards become general and unlimited, and in such a case so soon as the change of purpose, or animus manendi, can be inferred the fact of domicile is established." Lord Curriehill in the case of Donaldson v. M'Clure says: -"To abandon one domicile for another means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges and immunities which the law and constitution of the domicile confer on the denizens of the country in their domestic relations, in their business transactions, in their political and municipal status, and in the daily affairs of common life, but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence." Lord Halsbury, in Marchioness of Huntly v. Gaskell, expressed strong approval of Lord Curriehill's judgment, quoting this passage.

You are a citizen of Australia. Your domicile of origin is Australia because you were born here. As you did not take steps to make another country your domicile, your domicile is Australia and remained unchanged while you were overseas.

Permanent place of abode

The expression permanent 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 persons 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 the person intends to live for the rest of his or her life. It should be contrasted with a temporary or transitory place of abode outside of Australia.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) outlines some of the factors considered relevant in determining a person's place of abode. These are summarised at paragraph 23 in the ruling as:

•       the intended and actual length of the individuals stay in the overseas country (a period of two years or more in a country would generally be regarded as a substantial period)

•       any intention either to return to Australia at some definite point in time or to travel to another country

•       the establishment of a home outside of Australia

•       the abandonment of any residence of place of abode the individual may have had in Australia

•       the duration and continuity of the individual's presence in the overseas country, and

•       the durability of association that the individual has with a particular place in Australia.

You lived in foreign country A in rented accommodation which you established as your home. You were employed in foreign country A on a renewable contract and had no intention of returning to Australia except for short visits to family and friends.

Although Australia remained your domicile, the Commissioner is satisfied that you established a permanent place of abode outside of Australia during the period of the ruling.

You were not resident of Australia for tax purposes under the domicile test of residency.

3. The 183-day test

Where a person is present in Australia for 183 days during a 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 case, you travelled to Australia on a few occasions for a few weeks stay during your time in foreign country A. The purpose was to visit family and friends in Australia. You were not physically present in Australia for more than 183 days in any income year of the ruling.

You were not a resident of Australia under this test for the period of the ruling.

4. 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.

In your case, you are not a 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 of Australia under this test.

Your residency status

As you have not passed any of the tests of residency, you were not be a resident of Australia for taxation purposes for the period of the ruling.

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