Edited version of private advice

Authorisation Number: 1052065057429

Date of advice: 8 December 2022

Ruling

Subject: Residency

Question

Are you an Australian resident for taxation purposes when you accompany your spouse overseas on a posting?

This private ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

01 July 20XX

Relevant facts and circumstances

You were born in a country to parents who were citizens of another country. At birth you held citizenship of both countries.

You migrated to Australia.

You became a naturalised Australian in 20XX.

Your spouse is an Australian citizen who works. You have two children who are both Australian citizens.

Your spouse works and has been posted overseas with an expected start date for the posting in July 20XX. The posting is for 3 years.

You have lived in Australia since 20XX except for a period of 3 years where you accompanied your spouse on a diplomatic posting.

You have not left Australia in the past three years except for a two week trip to attend a relative's wedding earlier this year. When completing the incoming and outgoing passenger card you stated your residency as Australian and listed your current home address in Australia.

You are currently employed and have been permanently employed with them since 20XX. You have received in-principle support to work remotely in your current position. You will return to your normal workplace for work at least once per year to be present for the busiest part of the year in your workplace.

You intend to continue working for your Australian employer whilst overseas and will have your salary deposited into your Australian bank account as normal.

You do have to file XX tax returns as all XX citizens are subject to income tax on any income earned worldwide. You claim the foreign earned income exclusion and earn no XX derived income.

You possess an Australian driver's licence only.

You own your own home which will be rented for the period that you are living overseas with your spouse and children. You intend to place your furniture and possessions into storage. On your return to Australia following the completion of the posting you and your family intend to move back into your house.

You do not possess any assets in any country outside of Australia.

You intend to maintain your private health insurance.

You are not a contributing member of the Public Sector Superannuation Scheme (PSSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such person.

Relevant legislative provisions

Income Tax Assessment Act 1997, section 991-5

Income Tax Assessment Act 1936, subsection 6(1)

International Tax Agreements Act 1953

Reasons for decision

Overview of the law

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 Draft Taxation Ruling TR 2022/D2 Income tax: residency tests for individuals.

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.

Because the ordinary concepts test is whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

Application to your situation

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

•                    Physical presence - You have been physically present in Australia for most of the time that you have lived in Australia since immigrating in 20XX except for 3 years when you accompanied your spouse on a diplomatic posting overseas. Once the posting was completed you and your family returned to live permanently in Australia.

•                    Intention or purpose - Your intention is to reside in Country A temporarily to accompany your spouse and children whilst your spouse is on a diplomatic posting in Country A.

•                    Employment ties - You will continue to work for your Australian employer.

•                    Maintenance of assets - You have substantial assets in Australia.

•                    Social and living arrangements - Whilst in Country A you and your family will be living in furnished housing provided by your spouse's employer. Your children will attend a local international school and you will work from a home office performing your current role.

•                    You intend to return to Australia periodically and work from your workplace.

•                    You will maintain your private health insurance.

You will only be away from Australia temporarily and have not cut any ties to Australia.

Therefore, you would be considered a resident of Australia under the resides test.

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

Application to your situation

You were born in Country B to parents who were citizens of Country C (only). At birth your had dual citizenship. You have acquired a domicile of choice in Australia as you became a naturalised Australian citizen by choice and intend to live in Australia permanently with your Australian spouse and children. You only intend to live in Country A temporarily to accompany your spouse and children

Therefore, your domicile is 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 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 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.

The Commissioner is not satisfied that your permanent place of abode is outside Australia. This takes into account that:

•         You have an established home in Australia which you intend to move back into when you return to Australia

•         You will remain working for your Australian employer whilst overseas and your pay will be deposited into your Australian bank account

•         You intend to return to Australia to visit regularly not just for visiting extended family and friends but also to work from your Australian workplace

•         You intend to move back to Australia accompanying your spouse and children once your spouse's posting is completed.

You have not definitely abandoned, in a permanent way, living in Australia.

You are a resident of Australia under the domicile 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.

Application to your situation

You will not be present in Australia for 183 days or more during the 20XX, 20XX and 20XX income years. You will not be a resident under this test in these circumstances.

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.

Application to your situation

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

In the circumstances described, you satisfy the resides and domicile tests of residency and so are a resident of Australia for income tax purposes for the years ending 30 June 20XX, 30 June 20XX and 30 June 20XX.

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