Edited version of private advice

Authorisation Number: 1051814848444

Date of advice: 23 March 2021

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 ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian Citizen.

You are a XXXX XXXX.

In the year ended 30 June 20XX you lived in Australia and were a resident of Australia for tax purposes.

During the year ended 30 June 20XX you travelled to Country A for a holiday and met a person, who is a Country A citizen, while you were there. This person became your spouse.

You have worked for Company A in Australia for the last few years. There is a Country A division of the company called Company B.

In July 20XX you decided to move from Australia to Country A to be closer to your spouse.

You spoke with your employer, Company A, about your plan to move to Country A and about the possibility of continuing your employment as a XXXX XXXX with Company B.

In July 20XX Company A agreed to assign your employment to Company B.

You obtained a 2-year Country A Visa.

During the year ended 30 June 20XX you left Australia permanently to move to Country A.

Before you left Australia, you moved out of your rental home in Australia, sold your furniture and other belongings.

You took three suitcases and your bicycle with you to Country A.

You do not have any significant assets. You do not own any real estate.

You own some Australian shares and some Country A shares.

You maintain bank accounts in both Australia and Country A.

In the year ended 30 June 20XX after your arrival you and your spouse got married in Country A.

You and your spouse have lived together since your arrived in Country A.

You do not have children but own X pets together.

You did not own a car in Australia, your spouse owns a car in Country A.

Your intention is to remain living in Country A with your spouse for the long term.

You intend to apply for a Country A permanent residency visa.

Neither you nor your spouse are employees of the Commonwealth Government of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 6-5

Reasons for decision

Summary

Having considered your circumstances as a whole and the residency tests, the Commissioner is satisfied that you are not a resident of Australia for income tax purposes from the date of your permanent departure.

Detailed reasoning

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that if you are an Australia resident, your assessable income includes income gained from all sources, whether in or out of Australia. However, subsection 6-5(3) of the ITAA 1997 states if 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) as:

(a)   a person, other than a company, who resides in Australia and includes a person:

(i)            whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

(ii)           who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or

(iii)          who is:

(A)   a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

(B)   an eligible employee for the purposes of the Superannuation Act 1976; or

(C)   the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B).

The tests are otherwise known as:

•                     the resides test

•                     the domicile test

•                     the 183-day test, and

•                     the superannuation test.

The resides 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.

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 country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered 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.

You departed Australia permanently during the year ended 30 June 20XX, with no intention to return. You moved out of your rental home, sold your furniture and your other belongings. You packed your remaining belongings into three suitcases and departed for Country A with those suitcases and your bicycle. You had your employment transferred to the Country A branch of the company you are employed by. You do not maintain any significant physical assets in Australia. You live with your spouse and your pets in Country A.

Based on the information you have provided the Commissioner is satisfied that you are not residing in Australia according to ordinary concepts.

You are not a tax resident under the resides test.

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 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.

Your domicile is Australia as you are a citizen of Australia. You are not a citizen or permanent resident of any other country and you have not yet taken any steps to be a citizen or permanent resident of Country A. You hold a 2-year Visa, although you intend to apply for a Country A permanent residency visa via marriage.

Your domicile is therefore Australia.

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. 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 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 place in Australia.

You departed Australia permanently during the year ended 30 June 20XX. You work in Country A. Your spouse is a Country A citizen and you live with them and your pets in Country A.

The Commissioner is satisfied that you have a permanent place of abode outside of Australia with no intention to return to Australia.

While your domicile is Australia, your permanent place of abode is outside Australia, therefore you are not a resident of Australia under this test for tax purposes.

The 183-day test

Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that:

•                     their usual place of abode is outside Australia

•                     they have no intention to take up residence in Australia

The term 'usual place of abode' is not the same as 'permanent place of abode'. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country.

You departed from Australia during the year ended 30 June 20XX, and you were not present in Australia for more than 183 days in the year ended 30 June 20XX. You have not returned to Australia in the year ending 30 June 20XX and therefore you will not be present in Australia for more than 183 days in this income year.

You are not a tax resident of Australia under the 183-day test.

The superannuation test

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

A person is a resident under this test if they are:

•                     a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

•                     an eligible employee for the purposes of the Superannuation Act 1976; or

•                     the spouse, or a child under 16, of a person covered by either of the above.

You and your spouse are not eligible to contribute to the relevant Commonwealth super funds.

Therefore, the superannuation test does not apply to you..

Your residency status

You are not a resident of Australia for tax purposes from the date you departed Australia to live in Country A.

This private ruling cannot be relied upon if your circumstances change and you no longer reside or have a permanent place of abode outside Australia.

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