Edited version of private advice

Authorisation Number: 1051803069846

Date of advice: 05 February 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes after departing Australia?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2020

Year ending 30 June 2021

Year ending 30 June 2022

Year ending 30 June 2023

The scheme commenced on:

1 July 2019

Relevant facts and circumstances

You are an Australian citizen who relocated to Country A, with your spouse and children, on in early 2020 to take up employment with Employer A as a permanent employee.

Upon departure you intended to reside in Country A on an indefinite basis and not to return to Australia for the foreseeable future. While you intend to return to Australia at some point, you have no definite plans to do so.

Your employment is ongoing, permanent and likely to be for an indefinite period.

You hold a valid X-year "Resident" visa, which was sponsored by your employer. This visa is renewable every X-years, subject to a medical examination.

Your spouse and children also hold X-year renewable residency visas, again subject to medical examinations.

Your pay is deposited into a local bank account. To facilitate this, you have opened a local bank account.

You reside in a long-term leased and furnished property in Country A which is renewed on an annual basis. This is equipped with all facilities as would be expected in a permanent home.

Most of your furniture and family items were sold, donated to charity or given away prior to departure. Some personal items were stored with family. You moved to Country A with clothing and basic personal items only.

You retain one vehicle in Australia which has been stored with family while you decide whether to sell or retain it. In the meantime, you have cancelled its registration and insurance.

Some furniture was supplied by the company which leased the property to you. You have also purchased additional furniture and whitegoods.

You have a car which has been purchased locally.

You have arranged a local driver's license.

You entered into a multi-year contract for home telephone, internet and TV with a local company.

You and your spouse retain join ownership of the family home in Australia which has been rented on normal commercial, arms-length, terms. You have converted the mortgage to an investment loan.

You also maintain one bank account in Australia to facilitate payment of your loan, utilities, maintenance and insurance.

You have advised the Australian Electoral Commission and Medicare of your departure and have asked that your name be removed from the voting rolls.

You have cancelled your Australian private health insurance policy.

You receive health insurance through your employer and have also purchased local health insurance for your family.

You ceased membership of professional and social groups in Australia before departure.

You intend to visit Australia while on leave, but such leave is restricted to X weeks per year.

Neither you nor your spouse 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 with your spouse and family with the intention of living overseas for an indefinite period.

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 on an indefinite basis.

You have established an abode in Country A where you stay in rental accommodation. The property you rented supplied some furniture and you have also purchased other furniture and whitegoods locally.

You have withdrawn from professional and social arrangements in Australia - apart from your family relationships.

You are a non-resident for tax purposes under the resides test after departure in 2020 because -

•   You have no abode in Australia which remains available to you

•   You live in Country A with your family

•   You do not financially support any family in Australia

•   Your residential property in Australia has been leased and the loan converted to an investment loan.

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.

Your domicile of origin was Australia.

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.

Therefore, you will be a resident of Australia under this test unless the Commissioner considers you have established a permanent place of abode outside of Australia.

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.

You have established a permanent place of abode outside of Australia as:

•   Your home in Australia is rented and hence, is not available to you.

•   You have set up an established home with family overseas.

•   You anticipate visiting family during leave only.

•   Your family accompanied you.

You intend living in Country A for a considerable and indeterminable time. Further, you have abandoned your residence in Australia which is now rented.

The duration and continuity of your presence in Country A supports the argument that you established a long-term place of abode outside Australia. Your intended duration there indicates permanency.

While you will maintain an association with Australia through family relationships, these do not outweigh your long-term presence in Country A. These suggest that you have established a long-term abode in Country A. You have abandoned your association with Australia.

Consequently, the Commissioner is satisfied that you have a permanent place of abode outside Australia, and you are therefore a non-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.

As you will not be in Australia for more than 183 days in any year of income in the ruling period, you are not a resident for tax purposes under this test.

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 none of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not a resident of Australia for income tax purposes after departing Australia.

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