Edited version of private advice

Authorisation Number: 1051840611853

Date of advice: 19 May 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes in the 20XX financial year?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Australia who departed to live and work in Country A in late 20XX.

You are divorced and have two adult children who are financially independent. The children did not travel with you when you departed Australia.

After your divorce you stored your household effects in safe storage. The approximate value of the items stored was approximately $XX,000.

You first met your partner in Country B in 20YY.

You are a joint owner of a residential property in Australia that you own with your de facto partner. This property was purchased in 20ZZ. You did not make a financial contribution to the purchase of this property nor did you have any input into the names placed on the title of the property.

You moved in to live with your de facto partner in early 20XX and departed from your jointly owned residential property when you left Australia.

You provided financial support to your de facto partner in Australia while you were working overseas.

Upon departure from Australia you intended to take up full-time employment with a company in Country A. You were initially employed on a X-year contract which was extended by several years. You intended to remain in Country A until the end of your contract or on retirement, whatever occurred first.

Prior to departure you informed the Australian Electoral Commission of your departure. You were registered as an eligible overseas elector for federal elections. Your name remained on the State electoral role while you were overseas.

You are unsure whether you informed Medicare before your departure.

You were issued a working visa and a residential visa after arriving. You did not apply for permanent residency, only applying for a visa as a as a residential employee.

The visa was "Renewable and Transformable" and allowed you to remain initially for X month, then another Y months and finally Z months. This visa and visa extensions were arranged by your employer. Had your visa been cancelled you would have been obliged to leave the country. You were however allowed to remain in the country after your employment ceased and did so for several months after your employment ended.

While overseas you retained your private medical insurance.

Upon arrival in Country A you lived in a company provided secure, gated and guarded compound. You occupied a X-room unit which was for your sole use. You furnished this with furniture you brought with you from Australia and items purchased locally.

Assets while residing in Country A were household chattels including linen, rugs, furnishings, wall decorations, external living including garden furnishings, patio paving, lighting etc. You furnished this with minor items brought from Australia.

Assets purchased while overseas were approximately $XX,000 mainly in furnishing, including office and outdoor furnishing and chattels.

Your work arrangements were notionally X days a week on the site and most weekends at the duplex you occupied. You would travel between the duplex and the site at the start and end of each week. Occasionally, some weekend work was required at the site and, on those occasions, you stayed at the site.

On your days off work you would normally stay at the duplex site. You would also make occasional day trips away from the duplex site. While in Country A social engagements connected to the company and social connections with local personalities was a normal part of your routine.

You also took short holidays to various locations including several nearby countries. These holidays were for short periods of a few days to a month in duration.

Your de facto partner visited you, beginning in late 20XX. You joined your partner in travelling on several occasions.

You returned to Australia to attend your parent's birthday. You returned overseas shortly after this.

Your partner was not able to live with you overseas to allow them to continue operating a property in Australia which was rented via a casual booking agency. They were able to visit with you on occasions.

You retain ownership of an investment property in Australia which was rented through a rental agency in your home state. This property was rented from mid-20AA. You continued to pay the mortgage on this property while working overseas.

You also retained an Australian bank account and a vehicle valued at approximately $XX,000 in Australia. Your salary while employed overseas was paid into this Australian bank account.

While working in Country A you retained your private medical insurance. Evacuation for medical reasons was to be to a suitable medical facility or to your country of origin. In the event a medical evacuation was necessary, you believed it would most likely be to Australia for treatment. You therefore decided to retain your private medical insurance.

You were required to retain your membership of a professional association. You did not maintain any social or sporting ties with Australia.

You returned to Australia in late 20XX.

You did not renew your contract and stay in Country A because:

• The local security environment was deteriorating, becoming more dangerous.
• The local political situation was deteriorating, the country was becoming less stable and safe.
• The site was not developing as hoped and you could not see a bright future with that business.

Neither you nor your de facto 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 to take up employment in Country A.

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 live and work in overseas on a fixed term, contract, basis. This contract was extended for several years.

However, you have maintained strong family ties with Australia.

You have established what could be described as a strong presence overseas where you stay in a company owned gated and guarded compound with your own duplex.

You have maintained a strong connection with Australia as evidenced by -

•         Your Australian abode is available to you and you lived there when in Australia.

•         You returned to this property, and your partner, upon your return to Australia.

•         Your partner visited you in your duplex in Country A.

•         Your partner remained living in Australia.

•         You maintained your Medicare card.

•         You maintained your Australian bank accounts, mortgage and mailing address. You also maintained your name on the electoral roll.

Your accommodation overseas was entirely work-based. The duplex was provided by your employer and you lived there to facilitate working in the business which employed you. You did not intend to live there for the long-term nor did you establish connections to the local community apart from those necessary to work.

Given your stronger connections to Australia you are a resident for tax purposes under the resides test in the 20XX financial year.

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.

In your case, you are a citizen of Australia. You have left Australia and have chosen to live overseas. You have not been granted, nor have you actively sought, permanent residency in any other country. You stayed in Country A on a renewable short-term work visa which was arranged and renewed by your employer.

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. You remained there on a renewable resident visa.

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.

This concept was further explored in Harding v Commissioner of Taxation (2019) FCAFC 29 (Harding), where Davies and Stewart JJ stated at paragraph 40 that in reference to the term 'permanent place of abode', the word 'place' should accordingly be read as only including a reference to a particular country or state.

Further, the Full Court found in Harding at paragraphs 36 and 40 that 'permanent place of abode outside Australia' involves two considerations as follows:

1) Whether a taxpayer has definitely abandoned, in a permanent way, their Australian residence, and

2) Whether the taxpayer is living permanently in a specific country rather than moving between foreign countries.

In your case you have not established a permanent place of abode outside of Australia as:

•         You remain a joint owner of an Australian residential property.

•         Your partner and family did not accompany you to live overseas.

•         You only visited Australia while working overseas but returned here permanently once you ended your overseas employment.

•         You provided financial support to your partner who remained in the jointly owned Australian residential property while you worked overseas.

•         Your presence overseas was both short-term and entirely focused on and devoted to allowing you to work in that country in a business.

These indicates that you have not abandoned, in a permanent way, your Australian residence.

Consequently, the Commissioner is not satisfied that you have a permanent place of abode outside Australia, and you therefore remain a 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.

You have been in Australia for XX days in the 20XX financial year.

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 two of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a resident of Australia for income tax purposes in the 20XX financial year.

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