Edited version of private advice

Authorisation Number: 1051828528391

Date of advice: 16 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 ending 30 June 20xx

Year ending 30 June 20xx

Year ending 30 June 20xx

Year ending 30 June 20xx

Year ending 30 June 20xx

The scheme commenced on:

1 July 20xx

Relevant facts and circumstances

You are a citizen of Australia who departed Australia to live and work in Country A.

You are divorced and have two adult children. These children are independent and do not live with you.

Your other relatives live in Australia.

You returned to Australia on several occasions and your pattern of travel means that you spent less than 183 days in Australia in both the 20xx and 20xx financial years.

Your return trips to Australia have been to visit an elderly relative and your children. You wish to ensure that your relative has the necessary medical and social support to allow her to continue living independently. Most such trips are taken during the summer and mid-semester breaks and are meant to be short in duration, less than X weeks. However, you most recent trip was extended due to flight cancellations and travel restrictions caused by pandemic restrictions.

You live in an apartment in Country A where you were initially employed on a X-year employment contract. This contract was extended recently and now extends until 20xx.

You were granted a residency visa for Country A. This visa was arranged by your employer and will be renewed annually.

Prior to departure you had divorced and moved to live with a relative. You do not own any property in Australia, nor do you own any material assets or investments.

Your current intention is to work in Country A until the end of your career. You do not have a job or position held for you in Australia.

You opened a local account for day to day transactions but have also retained your Australian bank account and a bank card. You transfer part of your salary to the Australian bank account as the local bank card can be unreliable. Where necessary you use your Australian bank card for administrative convenience.

You have not retained any household or personal effects in Australia. You gifted your share of household effects to your children and transferred all remaining personal effects to Country A.

You have not retained social connections to Australia, apart from family. Your social connections are to Country A and Country B, where you worked previously.

You asked the Australian Electoral Office to remove your name from the electoral roll on departure. You also cancelled your private health insurance and replaced this with a local private health insurance policy.

You advised Centrelink that you were departing Australia but did not advise Medicare.

You have never been employed by the Australian Commonwealth government and do not belong 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 the intention of living overseas for the rest of your career.

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 until retirement.

You are a non-resident for tax purposes under the resides test as you expect to be living and working in Country A for a number of years. You cannot be said to be residing in Australia for this period.

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 have the right to reside permanently in that country.

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:

•         You have no home in Australia.

•         You have established a home in Country A.

•         You anticipate visiting family in Australia during leave only.

•         You intend on living in Country A for a considerable and indeterminable time.

The duration and continuity of your presence in Country A supports the argument that you have 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.

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 do not satisfy any of the residency tests 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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