Edited version of private advice

Authorisation Number: 1051989859228

Date of advice: 20 June 2022

Ruling

Subject: Residency

Question

Are you an Australian resident for the 20XX and 20XX income years?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

7 February 20XX

Relevant facts and circumstances

You were born in Country X and are a citizen of Country X by birth.

You immigrated to Australia.

You became an Australian citizen in 19XX.

You hold an Australian passport and a Country X passport.

You moved to Country Y in 19XX.

You established a company in Country Y in 20XX.

You have children who live in Country Z with your former spouse.

You regularly travel to Country Z to see your children.

You financially support your family in Country Z.

You are currently leasing a property in Country Y.

You held a permit for foreigners which expired in 20XX which allowed you to enter and exit Country Y without applying for a visa.

In February 20XX you were scheduled to return to Country Y from Country Z, however Country Y's borders had closed due to Covid-19.

You were then notified that the government of Country Y would only reissue visas from its Australian consulate.

You travelled to Australia to apply for a visa and wait for Country Y's border to open.

You arrived in Australia in February 20XX and were required to quarantine for 14 days to be eligible to apply for a visa.

You completed your quarantine in Australia and then applied for a visa through a visa service company.

You were not issued with a visa and the visa service company closed shortly afterwards.

In February 20XX, you flew from Australia to Country Z to visit your children and then flew to Country Y using a transit visa.

You returned to Australia in March 20XX and stayed with friends and family and continued to work remotely.

In March 20XX, the Australian Government placed a ban on Australian's leaving the country.

You received an exemption in April 20XX to leave Australia due to your work and your family being overseas.

In March 20XX Country Y suspended the entry of foreigners entering the country on valid visas or residence permits.

Between March 20XX and September 20XX, you continued your attempts to return to Country Y.

Between July 20XX and June 20XX, you travelled between Australia, Country Y and Country Z.

You were permitted to work in Country Y during the relevant period after being granted a government invitation letter.

Between July 20XX and 13 February 20XX, you continued to travel between Australia, Country Y and Country Z.

You were permitted to work in Country Y during the relevant period as you were issued with a business visa in your Country X passport.

Your Australian passport is your legal ID in Country Y.

Your Australian nationality as chief representative of your company cannot be changed, therefore your residency permit must be renewed using your Australian passport.

In February 20XX you flew to Continent X to see your family.

It was your intention to leave Australia in April 20XX to Country X to wait for the issue of a business visa.

It was your intention to remain in Country Y for the duration of your business visa.

When you are permitted to travel to Country Y on your Australian passport, you intend to apply to renew your residency permit in your Australian passport.

You have incurred high costs relating to cancelled flights and hotel quarantines for your trips to Country Y.

Your personal effects remain in Country Y.

You have a non-interest-bearing bank account which was opened prior to 19XX.

You have not made any contributions to your superfund since 19XX.

You own an investment property in Australia.

You also own a property in Country W.

You have two credit cards.

You are not listed on the Australian electoral roll.

You have expatriate health insurance for major illnesses.

You do not have private health insurance.

You have an accountant and a lawyer in Country Y.

You are a member of a sporting club in Country Y and are an overseas member of the Australian Club.

When completing incoming passenger cards when entering Australia, you state that you are a temporary visitor.

You have an Australian driver's licence.

You have not used Medicare since leaving Australia.

You do not intend to reside in Australia and intend to continue living in Country Y and operate your company from there.

In the years going forward, you intend to travel to Country Z to see your family.

You also intend to travel to Continent X, Continent Y and Country X to visit manufacturers that supply your company.

You have not obtained citizenship or permanent residency as you believe that although it is possible, you are not aware of any foreigner that has been successful in doing so.

You do not intend to travel to Australia in the years going forward.

You receive your mail at your company's office in Country Y.

You are not a Commonwealth of Australia Government employees for superannuation (super) purposes.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Question

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms resident and resident of Australia, as applied to an individual, are defined in subsection 6(1) of the ITAA 1936.

The definition offers four tests to ascertain whether each individual 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 they reside in Australia according to the ordinary meaning of the word resides.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests.

The resides test

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'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679).

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains " home ": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as " home ", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

•         Physical presence

•         Intention or purpose of presence

•         Family and business/employment ties

•         Maintenance and location of assets, and

•         Social and living arrangements

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia (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 each individual's circumstances.

We consider that your circumstances are not consistent with you residing in Australia.

This is because:

•         You have been predominately living in Country Y since 19XX.

•         You run a business that is based in Country Y.

•         You held a residency permit in Country Y.

•         You have continued to rent an apartment in Country Y.

•         You did not intend to travel to Australia.

•         You have made multiple attempts to return to Country Y.

•         You have been working remotely in Australia as you have been unable to return to Country Y permanently.

•         You have been staying with a variety of family and friends in Australia.

You are not a resident under this test.

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Domicile

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

In your case, you were born in Country X and your domicile of origin is the Country X. You immigrated to Australia and became an Australian citizen. Your domicile of origin then changed from Country X to Australia.

It is considered that you have not abandoned your domicile of origin in Australia and acquired a domicile of choice in Country Y. You were not entitled to reside in Country Y indefinitely as you only held a residency permit which expired in March 20XX.

Although you have lived in Country Y for many years and previously held a residency permit in Country Y, there is currently insufficient information available to the Commissioner to determine whether you have acquired a domicile of choice in Country Y.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The courts have held that the phrase 'permanent place of abode' calls for a consideration of the town or country where a person is located. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has his or her permanent place of abode outside Australia are:

a)    whether the taxpayer has definitely abandoned, in a permanent way, living in Australia; and

b)    whether the taxpayer is living permanently in a specific country.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

a)     the intended and actual length of the taxpayer's stay in the overseas country;

b)     whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

c)     whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

d)     whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

e)     the duration and continuity of the taxpayer's presence in the overseas country; and

f)      the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

The Commissioner is satisfied that your permanent place of abode is outside Australia. This takes into account that you have been predominately living in Country Y since 19XX, you are renting an apartment in Country Y, your company is based in Country Y and you only returned to Australia for an extended period due to Covid-19.

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

183-day 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 were present in Australia for 183 days or more in the 20XX income year. We now need to consider whether we are satisfied that, during the 20XX income year, your usual place of abode was outside Australia and your intention was to take up residence in Australia.

In the context of the 183- day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. A person can have only one usual place of abode under the 183- day test. However, it is also possible that a person does not have a usual place of abode. This is the person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual 111place of abode. When comparing two places of abode of a particular person, it is necessary to examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode (Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836).

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia for the relevant income year and that you did not intend to reside in Australia.

In respect of the usual place of abode this takes into account that you have predominately lived in Country Y since 1999 and only intended to stay in Australia until you were able to return to Country Y. You did not intend to reside in Australia permanently and have undertaken many measures to attempt to return to Country Y.

You have not been present in Australia for 183 days or more during the 20XX income year.

You are not a resident under this test.

Superannuation Test

An individual is a resident of Australia if they are either 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 they are the spouse, or the child under 16, of such a person.

You are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person.

Therefore, you are not a resident under this test.

Conclusion

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the years ended 30 June 20XX and 20XX.

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