Edited version of private advice

Authorisation Number: 1052006133084

Date of advice: 15 July 2022

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

Will you be solely a resident of Australia under Article 4(2) of the Australia - United States Double Tax Agreement (DTA)?

Answer

Yes.

This ruling applies for the following period:

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

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You first accepted an offer of employment with Company Z in Country Z some years ago.

You have accepted an extended contract of employment from Company Z in Country Z.

Company Z has committed to giving you an option to return to Australia.

Included in your role is the executive leadership of some business lines in Company Z in Country Z and all business lines in Company Z within another region (including Australia).

Your spouse will join you for part of the time in Country Z.

Your spouse will spend more than 183 days in Australia.

You and your spouse sold your family home in a prior year (the property was always considered your main residence for this period).

You purchased a new family home in the following year and are treating this home as your main residence.

It will not be used to generate income.

You and your spouse have adult children who will remain in Australia while you are overseas.

It is intended at least one of these children will occupy the family home in Australia where you and your spouse will store personal effects including car, furniture, pets and personal belongings.

You and your spouse will also use this home as a base when returning home to Australia during the secondment.

You intend to lease an apartment in Country Z to act as temporary accommodation during the secondment.

You intend to maintain household furnishing to furnish this apartment but will leave the majority of your personal assets in Australia, stored at the family home.

You own a number of investment properties which will be converted to family holiday accommodation during this appointment.

Your spouse owns a unit which will be leased on a long term basis during the secondment.

You and your spouse will retain Australian shares, Australian bank accounts, Medicare cards, membership of Medibank Private and Australia driver's licenses.

You and your spouse will also remain listed on the Electoral Roll during the secondment.

You will roughly reside evenly between Australia and Country Z during any given income year.

You and your spouse will maintain a local bank account in Country Z and will be considered to be a tax resident of Country Z under Country Z tax legislation.

Neither you or your spouse, have ever been employees of the Commonwealth Government and hence neither are members of any government superannuation scheme.

You and your spouse are members of a SMSF. This fund has a trustee company which is incorporated in Australia. You and your partner intend to continue contributing to this SMSF during the secondment.

Relevant legislative provisions

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997 section 995-1

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 (also referred to as the ordinary concepts test)

•         the domicile test

•         the 183-day test, and

•         the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides 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 domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

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.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

We have taken the following into consideration when determining whether you meet the resides test:

•         You have accepted an extension to your contract in Country Z.

•         You will be in Australia for several months and several months in Country Z.

•         Your spouse will join you for part of your time in Country Z.

•         You have a home in Australia which you will return to.

•         You have left most of your belongings in Australia.

•         You have a number of investments in Australia.

•         Your children are in Australia.

You are residing in Australia according to ordinary concepts.

You are a resident under this test.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

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 in 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 a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and 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 your domicile is Australia as you were born in Australia and you are a citizen of Australia.

You have not taken any steps to change your domicile.

You are not a resident under this test.

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 phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. 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 their permanent place of abode outside Australia are:

•         whether the taxpayer has definitely abandoned, in a permanent way, living in Australia

•         whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

(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.

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•         Your spouse will only join you in Country Z for part of the time you are in Country Z working

•         You will be in Australia for half of the year

•         You will return to your family home in Australia

•         You will rent an apartment in Country Z

•         You will only take some of your belongings to Country Z and leave the rest in your home in Australia.

The Commissioner is not satisfied that your permanent place of abode is outside Australia.

Therefore, you are a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•         the person's usual place of abode is outside Australia, and

•         the person does not intend to take up residence in Australia.

You will be in Australia for several months of the year each year.

You are 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 member on behalf of whom contributions are being made to 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

You are a resident of Australia for taxation purposes.

Country Z Double Tax Agreement (DTA)

As you are considered to be a resident of Country Z under its domestic tax law the tie break test in the Country Z Double Tax Agreement (DTA) will also need to be considered in order to establish your residency position in Australia.

You have a permanent home available to you in both Australia and Country Z.

You have a habitual abode in both Australia and Country Z.

You are spending several months in each country.

You will maintain a number of links and associations with Australia including medical, housing, electoral, family and investment. You will also retain Australian citizenship which can be used as a test to finalise the question of personal and economic relations.

Your personal and economic relations are closer with Australia.

Accordingly, under this tie break test you will be considered to be solely a tax resident of Australia under the double tax agreement.

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