Edited version of private advice

Authorisation Number: 1052415316959

Date of advice: 30 June 2025

Ruling

Subject: Residency

Question

Is the taxpayer a resident of Australia for taxation purposes from when he departed Australia, under subsection 6(1) of the ITAA 1936?

Answer

No.

This ruling applies for the following period:

Income year ending 30 June XXXX

The scheme commenced on:

X/XX/20XX

Relevant facts and circumstances

1.  The taxpayer was born overseas on XX/XX/19XX, was previously a foreign citizen and held a foreign passport in that country.

2.  They moved to Australia when they were a child, and subsequently raised and undertook their education in Australia.

3.  The taxpayer became a citizen of Australia and holds an Australian passport. At the time of receiving their Australian citizenship, they were required to relinquish their overseas citizenship.

4.  As an adult, the taxpayer departed Australia to work for an overseas business.

5.  Upon their departing Australia, they took with them all their necessary personal belongings that they would require.

6.  They are single and have no dependents.

Previously residing in Australia

7.  Prior to departing Australia, the taxpayer resided at a property in Australia.

8.  They acquired the property using funds provided by their parents under an informal loan agreement.

9.  While residing in Australia, they paid the gas expenses for the property only.

10.  The taxpayer's employment history involved casual and part-time roles in Australia.

11.  The taxpayer, prior to departing Australia accepted work for the overseas company as part of an internship. At this time, the taxpayer was on a break from university, and it was decided by their family that they should gain some exposure to the business in Australia before taking on their permanent employment overseas.

Employment

12.  The taxpayer accepted a full time role with the overseas, family owned business.

13.  The taxpayer departed Australia, to the country of their birth, on xx/xx/20xx and subsequently signed the employment contract.

14.  The contract outlined that the taxpayer would be based overseas with the term of the employment contract being permanent and indefinite.

15.  The taxpayer fully expected this role to be for several years and most definitely more than 2 years.

16.  The taxpayer was registered on the overseas payroll.

Overseas residence

17.  The taxpayer resides overseas on a Foreign Residence Permit which provides them with the rights to reside and work overseas for a period of a few years. This visa is renewable, and the taxpayer intends to utilise this renewable feature of this visa.

18.  Though the taxpayer owns a property overseas, solely in their name, they chooses to permanently reside at a relative's house, who they have a close relationship and wanted to spend more time with and to avoid the attention required to maintain a property by themself.

19.  The property overseas is planned to be their marital home after they get married. There are no intentions of renting this property out.

Family and Social Ties

20.  The taxpayer's personal belongings are all maintained at the relative's property.

21.  Most of the taxpayer's extended family and friends, who reside overseas, they visit on a regular basis.

22.  The taxpayer is a member of a local club overseas which they attend regularly.

Financial and Administrative ties

23.  In relation to financial and administrative ties to Australia:

(a)          The taxpayer has removed their name from the Australian electoral roll, cancelled their private health insurance and redirected their Australian mail to their overseas residence.

(b)          The taxpayer does not have any memberships or associations in Australia.

(c)          The taxpayer has not been an employee of the Commonwealth Government of Australia and therefore has not been a member of the Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation Scheme (PSS) and does not contribute to an Australian superannuation fund.

(d)          The taxpayer earned interest income from Australian bank accounts since departing Australia, with tax withheld, which was subsequently refunded due to the provision of their Tax File Number (TFN) to.

24.  In relation to the financial ties with the overseas country:

(a)          The taxpayer has an overseas driver's license, bank accounts and credit cards for their daily use and a mobile phone contract.

(b)          The taxpayer uses the overseas bank accounts for daily use and it is where their salary is deposited.

(c)          The taxpayer has an Identification Number (equivalent to an Australian Tax File Number) and since their departure, has lodged individual tax returns and paid income tax overseas.

Maintenance and Location of Assets

25.  In each of the income years, a large proportion of the assets owned by the taxpayer, were held overseas with the remaining % located in Australia.

26.  The taxpayer assets in Australia are made up of the property, shares and cash in Australian bank accounts.

27.  As the taxpayer is residing overseas, they have provided their parents with verbal authority to make all necessary decisions on the property.

28.  There are minimal decisions that are required to be made in relation to the property and those that are made are mainly in relation to:

•                     the cleaner who cleans the property from time to time; and

•                     any extended family members that may stay in the property occasionally.

29.  The taxpayer's parents have paid all the associated expenses of the property in Australia (since 20YY)

30.  The taxpayer parents do not want to use the property for income-producing purposes. However, it may be used by visiting family and/or friends.

31.  The shares held in Australia are held as a minority shareholder.

32.  The taxpayer has not received any dividends from Australian shares and therefore, there have not been any franking credits received in the relevant income years.

33.  The taxpayer does not have any direct or indirect interest in the overseas business.

34.  The taxpayer has not purchased any assets in Australia since permanently departing.

35.  Whilst the taxpayer has an Australian driver's license, they do not own any vehicles in Australia.

36.  The taxpayer assets overseas comprise: an unoccupied residential property, cash primarily located in overseas banks or financial institutions and shares traded on the overseas stock exchange.

37.  With the exception of the taxpayer's shareholding in Australia all of the taxpayer's shareholdings are in overseas companies.

Visits to Australia

38.  The taxpayer made several short trips to Australia since they departed.

39.  On their visits back to Australia, whilst they have stayed in the property they own, they typically stay at their parents' property or temporary accommodation.

40.  The taxpayer's longer trips to Australia were social or personal trips visit family and friends.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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

Question

Is the taxpayer a resident of Australia for taxation purposes from when they departed Australia, under subsection 6(1) of the ITAA 1936?

Summary

The taxpayer is not a resident of Australia for tax purposes under section 6(1) of the ITAA 1936 for each of the income years.

Reasons for decision

1.  Subsection 995-1(1) of the Income Tax Assessment Act 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).

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

3.  The definition offers 4 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.

4.  Only one of the tests needs to be met for an individual to be a resident of Australia for tax purposes.

5.  Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals (TR 2023/1)and applied below.

Resides or Ordinary Concepts Test- Paragraphs 26 to 54 of TR 2023/1

6.  The resides test is the primary test of tax residency for an individual. If you reside in Australia according to the ordinary meaning of the word resides, you are considered an Australian resident for tax purposes.

7.  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'.

8.  The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test[1]:

•                     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.

9.  No single factor is decisive, and the weight given to each factor depends on your specific circumstances.

10.  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.

11.  The following factors are considered relevant to determining whether the taxpayer satisfied the resides test:

(a)          As an adult, the taxpayer accepted a contract with an overseas family owned company for an indefinite period. The taxpayer's role is supported by a five-year visa, which they intend to renew. Their employment is full-time and based entirely overseas with no business or income-earning activities in Australia. This indicates a strong economic realignment toward overseas.

(b)          Since departing Australia, the taxpayer has taken deliberate steps to sever formal ties with Australia; and establish themself overseas; a strong indicator of intention to permanently depart and cease Australian tax residency. Though they have provided a TFN to the Australian financial institutions, and retains Australian citizenship, this is not determinative of tax residency under section 6(1) of the ITAA 1936.

(c)          The taxpayer's parents remain in Australia, while they reside with their relatives overseas. They have no partner or children in Australia. Since relocating, they have joined clubs and social organisations overseas reflecting integration into the local community. They have returned to Australia multiple times, primarily for family visits or leisure, but has no ongoing social or community commitments in Australia. There is no evidence of employment or income-earning activity during these visits.

(d)          The taxpayer owns residential properties in both Australia and overseas. They own a house which was paid for by their parents. This property has never been rented and remains vacant, with all maintenance and costs managed by their parents. While they check on the property when visiting Australia, they do not reside there. Overseas, the taxpayer currently lives with their relatives and owns another property that they intend to occupy once married.

(e)          Most of their assets are located overseas.

12.  On balance, having regard to all the relevant factors, it is considered that the taxpayer does not reside in Australia under the resides test. The taxpayer has been physically present overseas for an extended period, with the intention of remaining overseas. Their significant assets, employment, and accommodation are located overseas, and their day-to-day life is based there. While the taxpayer retains some limited ties to Australia these connections are not sufficient to outweigh the factors indicating that Australia is no longer their home.

13.  Therefore, the taxpayer is no longer residing in Australia, and is not a resident of Australia under this test for the relevant income years.

Domicile and Permanent Place of Abode Test - Paragraphs 55 to 82 of TR 2023/1:

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

15.  Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile. For example, you may have a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

16.  You always have a domicile and you can only have one domicile at any point in time. Your particular domicile continues until you acquire a different one, either by choice or operation of the law.

17.  To acquire a domicile of choice you must have both lawful physical presence in a foreign country and an intention to make your home indefinitely in that country.

18.  Whether your permanent place of abode is outside Australia is a question of fact to be determined in light of all the facts and circumstances of each case. Key considerations in determining whether you have your permanent place of abode outside Australia are:

•                     whether you have definitely abandoned, in a permanent way, living in Australia

•                     length of overseas stay

•                     nature of accommodation, and

•                     durability of association.

19.  Since departing Australia the taxpayer has demonstrated the physical presence and intention required to establish a domicile of choice outside Australia. The taxpayer has maintained stable accommodation, engaged in long term employment and established significant personal and economic ties overseas. These factors indicate a settled and permanent place of abode overseas and therefore, the taxpayer is not a resident of Australia under the domicile test in section 6(1), for each of the income years since departing Australia.

183-Day Test - Paragraphs 83 to 95 of TR 2023/1

20.  An individual present in Australia for 183 days or more in an income year is a resident unless their usual place of abode is outside Australia and they have no intention to reside in Australia.

21.  As the taxpayer has not been present in Australia for 183 days or more in any 12-month period, since departing Australia, they do not meet the conditions for residency under the 183-day test in section 6(1).

The Commonwealth Superannuation Fund Test - Paragraphs 96 to 97 of the TR 2023/1

22.  The taxpayer is not a contributing member of any government superannuation scheme, therefore this test does not apply.

Conclusion

23.  Having regard to all the residency tests in s 6(1) of the ITAA 1936, it is concluded that the taxpayer is not a resident of Australia for income tax purposes. The taxpayer does not satisfy the resides test, nor does the domicile test apply given their domicile of choice is overseas. Additionally, the taxpayer does not satisfy the 183-day test or the superannuation test. Accordingly, the taxpayer is not a resident of Australia for income tax purposes under section 6(1) of the ITAA 1936 for each of the income years.

[1] Taxation Ruling TR 2023/1 Income Tax: residency tests for individuals, paragraph 20.

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