Edited version of private advice

Authorisation Number: 1052267294591

Date of advice: 27 June 2024

Ruling

Subject: Residency

Question

Are you considered a tax resident of Australia from when you depart?

Answer

No.

Under the law, meeting a single test suffices for being deemed a tax resident. In your case, upon your departure from Australia you will no longer satisfy any of the tests. You are considered a non-resident for tax purposes of Australia.

This ruling applies for the following periods:

Year ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

You and your spouse currently live in Australia.

Person 1 has dual citizenship with Australia and Country A.

Person 2 has dual citizenship with Australia and Country B.

You and your spouse own an Australian property (the property). in equal shares as tenants in common.

You own a second property located in Country B (the Country B property).

Person 1 is allowed to stay in the Country B for XX months after the date of entering with Person 2.

Person 1 intends to apply for permanent residency of citizenship of country B in the future.

You will reside in the property until XX XXXX 20YY. You will then put the property up for sale and intend to have the property sold by XXXX 20YY.

You will reside in temporary accommodation up until the date you depart Australia.

You will move all your personal effects to the Country B before your departure.

You will sell all your household effects prior to your departure to Country B.

You intend to depart Australia after the sale of the property and reside from there on in the Country B property.

You intend to return to Australia every year to see family and friends. You need to return to Australia annually to receive maintenance for Person 1's medical requirements.

Your family and extended family reside in various locations around Australia and Country C. Your children are not dependent as they are all adults with their own families.

No family members apart from your spouse will accompany on your travels.

When you leave Australia, you will notify the Australian Electoral Commission and Medicare that you are departing.

When you leave Australia, you will suspend or cancel your private health insurance policy.

You will retain the following assets inside Australia after your departure:

Table 1: You will retain the following assets inside Australia after your departure:

You own the following assets outside of Australia:

Table 2: You own the following assets outside of Australia:

You intend to invest the proceeds from the sale of the property within Australian investment funds.

You expect in future years you will spend approximately XX months in Country B, XX months in Australia and the remainder of the years sightseeing in various countries.

You have no employment nor income from sources outside of Australia.

You have provided a list of your travel movements in the three years prior to this ruling and during the ruling period.

Person 1 is a member of a club within Australia and will be so until XXXX 20YY. Person 1 intends to retain connections with people from this club.

Person 1 has various social contacts with previous employees of which they retain connections.

Person 2 has various friends residing in Australia.

Person 1 is a member of clubs and associated golf groups in Country B.

Person 2 is a member of several primary school, secondary school, college and work alumni groups in the Country B.

You have a driver's licence in Australia and Country B.

Person 1 also has a driver's licence in Country A.

You will sell your Australia property and depart to Country B by XX XXXX 20YY.

You are not a member of the Public Sector Superannuation Scheme (PSS) or Commonwealth Superannuation Scheme (CSS).

Assumptions

You will sell your property by XX XXXX 20YY and depart to the Country B.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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 Taxation Ruling TR 2023/1 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:

•         Period of physical presence in Australia - You will be in Australia for XX months a year while the remaining XX months you will be living in Country B.

•         Intention or purpose - your visits to Australia are to see family and friends and you declare yourselves as residents of the Country B on passenger cards.

•         Behaviour while in Australia - you will be staying in transient or temporary accommodation while in Australia.

•         Family ties - your family will be moving with you to the Country B.

•         Maintenance of assets - your assets will mostly be moved to the Country B while retaining some Australian investments.

•         Social and living arrangements - you have social ties to both Country B and Australia although your living arrangements will be consistent with living in the Country B.

You will not be resident of Australia under the resides test for the period from XX XXXX 20YY (when you depart).

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund 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 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

In your case, you were born in Country A and Country B, and your domicile of origin is your respective country of birth. You both immigrated to Australia and became Australian citizens.

It is considered that you abandoned your domiciles of origin and acquired a domicile of choice in Australia. You are not entitled to reside in the Country B permanently but intend to apply for permanent residency in the future. It is considered that you have not yet abandoned your domicile of choice in Australia. Therefore, your domicile remains in 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 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 consider that your circumstances are similar to an example provided within paragraph 76 of TR 2023/1 Income tax: residency tests for individuals:

[76] ....if you depart for an unspecified or substantial period, pack up your home in Australia, set up a home in a foreign country and live there with your family returning only occasionally such as for cultural events, special celebrations or annual leave, you are likely to meet the description of someone who has abandoned Australia as a place of residency and commenced living permanently overseas. This is despite the fact that you may at some point intend to return to Australia.

Application to your situation

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

•         You will stay in the Country B for approximately XX months each financial year and XX months in Australia or other countries for sightseeing purposes.

•         You are selling your Australian home and moving into your home in the Country B.

•         While visiting Australia you will be residing with family, friends or temporary accommodation.

•         You will retain assets within Australia such as bank accounts, investments and superannuation.

•         You will be living in your home that you own in the XXXX which you have moved all of your personal and household belongings too.

•         You have family ties to Australia and social ties between both countries.

The Commissioner is satisfied that upon your departure to Country B your permanent place of abode will be outside Australia. Therefore, you will not be 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.

Application to your situation

You will not be present in Australia for 183 days or more during the 20YY-YY income year. Therefore, 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.

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.

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