Edited version of your private ruling

Authorisation Number: 1051814849554

Date of advice: 22 April 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 20XX

The scheme commenced on

December 20XX

Relevant facts and circumstances

You are an Australian citizen. You took up employment with an employer in a foreign country. Prior to this, you lodged tax returns as a resident of Australia.

You do not have a spouse or children.

You departed Australia to live and work in a foreign country in December 20XX.

You own a house in Australia. It is not being rented out as you believe it will remain in better condition for possible sale in the future.

Prior to your departure, you:

• cancelled your gym membership in Australia;
• notified your Australian bank of your intention to depart and requested a non-interest-bearing account;
• notified the Electoral Commission of your departure and requested to be removed from the electoral roll;
• sold your registered Australian vehicle.

You moved to a foreign country to pursue your career. Your employment contract with the employer in a foreign country runs on a rolling basis whereby there is no set date on which the contract finishes. It continues indefinitely until you are otherwise notified. Along with your salary, your remuneration includes a housing and transport allowances.

You entered a foreign country on an employment visa which was provided by your employer there. It is renewed each year.

Since arriving in the foreign country, you established an apartment as your place of abode. You intend to treat the property as your residence for your entire stay in the foreign country, which is expected to be several years in total. You are currently in the process of renewing your rental agreement for a second year.

On arriving in the foreign country, you opened a bank account where you receive your salary and from which you pay your day to day expenses.

You have established a social circle in a foreign country with close colleagues within your organisation and other individuals across the organisation whom you do not work with directly. Due to Covid-19 your ability to establish connections outside of the organisation have been hindered significantly. You utilise the free pool and gym facilities which are provided by your employer.

You are free to return to Australia for three weeks per year. However, you have not returned to Australia since your initial departure date. You recently spent your leave period in other countries.

You intend to make short visits to Australia when border restrictions are lifted.

Until your employment contract ends, you consider a foreign country to be your permanent place of abode. To date, you plan to reside in there for several years where you will maintain your employment connections and social life.

Since your departure from Australia, you have made several trips from a foreign country.

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

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', 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 for income tax purposes. These tests are:

• the resides test
• the domicile test
• the 183 day test
• the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

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 resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

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 IT 2650 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.

Based on the facts you have provided, the Commissioner considers that you ceased residing in Australia according to the ordinary meaning of the word 'resides' when you departed Australia to live and work in a foreign country, you have established a new home there in a rented apartment. You intend to live in the apartment for your entire stay in the foreign country, which is expected to be several years. You are currently in the process of renewing your rental agreement for a second year.

You are not a resident of Australia for taxation purposes under the resides test.

The domicile and permanent place of abode 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

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

As you have made no attempt to change your domicile while living in a foreign country, your domicile is Australia and remains unchanged.

Permanent place of abode

The expression '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 person's 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 you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

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.

You entered a foreign country on an employment visa which was provided by your employer there. It is renewed each year. It does not give you the right to reside there permanently.

In the foreign country, you have established a home in a rented apartment. You intend to treat it as your residence for your entire stay in a foreign country which is expected to several years. You are currently in the process of renewing your rental agreement for a second year. Your house in Australia will remain vacant for possible sale.

Although you live in rented accommodation in a foreign country a permanent place of abode, as stated above, does not have to be everlasting or forever. In your case you intend living in the apartment for several years and will not return to your Australian house until your time in a foreign country is over if you do not sell it. The Commissioner is satisfied that, on balance, you have a permanent place of abode outside of Australia.

Therefore, you are not a resident of Australia under the 'domicile and permanent place of abode' test of residency.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

You have not been present in Australia for a total period of more than half of the year of income.

Therefore, you are not a resident of Australia under the 183-day test.

The superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (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.

You are not eligible to contribute to the PSS or CSS. You have no spouse. You are more than 16 years of age.

Therefore, you are not a resident of Australia under the superannuation test.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you ceased to be an Australian resident for taxation purposes from 13 December 2019.

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