Edited version of private advice

Authorisation Number: 1051997696466

Date of advice: 29 June 2022

Ruling

Subject: Residency

Question

Are you an Australian resident for tax purposes from the date you left Australia?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country A.

You moved to Australia over XX years ago.

You are a citizen of Country A and Australia.

You have been on international assignment working in Country B for the last three years, you returned to Australia about 3 months before you left for Country C.

You only visited Australia once in the three year period you lived in Country B, the trip was for two weeks.

You have accepted a role in Country C on a two year contract.

You relocated to Country C.

You do not have any vacation time for the next six months, after that you may visit other countries for New Year.

When you depart Australia you will put Country C as your residential address.

You do not need a visa to enter Country C and your work permit will be arranged by your employer which will be for approximately two to three years.

You intend to come back to Australia after two to three years.

You family does not reside in Australia, your father lives in Country A and your brother in Country D.

You haven't been in Australia on a permanent basis for over nine years.

You are a fellow member of a professional organisation relating to your employment in Australia.

You have a drivers license in Australia.

You informed the electoral commission that you were departing while you were on international assignment in Country B so that will remain. You plan to inform Medicare that you are departing Australia.

You do not have private health insurance in Australia.

You were living in a rental apartment for approximately two months when you returned to Australia that was leased for longer than six months, but you have informed the rental agency you are leaving and they are looking for new tenants.

Before returning to Australia your previous company provided you with accommodation while you were on international assignment.

You will be staying in hotel accommodation in Country C until you secure a longer term rental accommodation.

You own a property in Australia which has been rented out since you purchased it under normal commercial lease arrangements at commercial rent rates. You have engaged a property management company to manage the rental of the property. You do not use this residence as your address on any documents and you don't have any mail sent to this address. You remain responsible for the mortgage on this residence.

You have bank accounts in Australia.

You do not have any household effects as the apartment you rented in Australia was furnished. You don't have many personal effects as you have recently returned to Australia from overseas, only your clothing and laptop which you have taken to Country C.

You will change your mailing address to Country C once you have permanent accommodation organised.

You have informed your Australian bank you are overseas but you do not hold any investments with them.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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 residing in Australia.

This is because:

•         You haven't been in Australia on a permanent basis for about 9 years, you returned to Australia for about three months

•         You are now working and living in Country C

•         You intend to live in Country C for the period of your contract, approximately 2-3 years

•         When you departed Australia you listed Country C as your residential address

•         You do not have any family in Australia.

•         You are currently in temporary accommodation in Country C while you find permanent accommodation

•         You will use your Country C address as your mailing address once you have secured permanent accommodation

•         You are not on the electoral roll in Australia and do not have private health insurance in Australia. You intend to notify Medicare that you are no longer living in Australia

•         You do not have any household effects as the apartment you rented in Australia was furnished. You don't have many personal effects as you have recently returned to Australia from overseas, only your clothing and laptop which you have taken to Country C.

•         You have informed your Australian bank you are overseas; you do not have any investments with them only a savings account.

You are not a resident of Australia under the resides 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 A and your domicile of origin is Country A. You immigrated to Australia and became an Australian citizen.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia.

Going forward, you are not entitled to reside in Country C indefinitely. While living in Country C, you hold a work permit which is only valid while you have employment in Country C.

Therefore, your domicile is still Australia.

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 abandoned living in Australia for the foreseeable future; you have not lived in Australia permanently for over nine years

•         You intend to secure permanent accommodation in Country C

•         You do not have a residence or place of abode in Australia, you won an investment property but that has been rented out since you purchased it

•         You have abandoned your rental accommodation in Australia, with the rental agency finding new tenants for the property

•         You do not have family ties in Australia

•         You have informed your banks you are no longer living in Australia, you are not on the electoral roll in Australia and you intend to inform Medicare you are no longer living in Australia

•         You don't intend to visit Australia regularly while you are living and working in Country C, you may have a short trip to visit friends but also intend to visit other countries on vacation

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 will not be present in Australia for 183 days or more during the relevant 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 relevant period.

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