Edited version of private advice

Authorisation Number: 1051603514095

Date of advice: 22 November 2019

Ruling

Subject: Resident of Australia - temporary work in another country

Question

Were you a non-resident of Australia for taxation purposes?

Answer

No

This ruling applies for the following periods:

1 July 2016 to 30 June 2017

1 July 2017 to 30 June 2018

1 July 2018 to 30 June 2019

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You were born in A. You are a citizen of A. You hold an Australian Permanent Resident visa.

You were employed by an Australian company (B) and were sent to C on secondment with D for a period until XX XXXX 20XX. On X XXXX 20XX, you ceased employment with the Australian company and commenced a contract with D in C. This was to take up permanent full time employment with the company in C, which you had previously been seconded with. This appointment was for an indefinite period. Your employment contract did not specify an end date. Your intention was to live and work in C indefinitely. Your employment contract provided entitlement to one home passage.

You do not own any real property in Australia.

You own a discretionary dividend share in E, which is a company within the B group in Australia. This share has no value.

The car that you own was garaged at a leased unit in Australia whilst you were living in C. You lived in this unit with a flatmate prior to relocating to C. The lease was for 12 months and it commenced in XXXX 20XX, which was a XX month extension to the lease which commenced in XXXX 20XX.

You continued to pay rent as the lease with your flatmate did not expire until XXXX 20XX. A replacement tenant was not found mainly because you needed a place to store your car, which you did not want to sell at the time as it had low kilometres and was holding value. You were a high income earner and could afford to keep the lease going.

Personal effects were taken with you when you relocated to C.

Notification was provided to the relevant institutions/organisations such as your tax agent and bank in Australia of your C mailing address.

Your salary from working in C was paid into your C bank account.

Australian private health insurance was maintained because dental and optical are cheaper in Australia than in C. Your C health policy did not cover dental and optical. Any necessary dental or optical consultations were sought in Australia whilst you were in Australia on business trips and or annual leave.

Lifestyle and Habits in C

You do not have any immediate family in Australia. You are not married and do not have any children. Your partner lives in C. You first met your partner in XXXX 20XX. They spent around XX% of their time at your apartment. You and your partner caught up regularly with their friends for social functions.

You established a seasonal wardrobe of clothes in C through purchasing many items of summer clothing for the warmer climate. You did not have a summer wardrobe in Australia as this was not required in your locality.

In XXXX 20XX one of your parents visited for X days. The parent also visited during the Christmas period in 20XX for around X days. During their visits, you took them to visit local attractions in C. In XXXX 20XX your other parent visited for around X days. You took them to visit local attractions as well. Your parents live in country A.

You joined a local sporting facility during the first year you began living in X. You participated in other recreational activities such as hiking and bush walking. In addition to this you joined another sporting club from XXXX 20XX - XXXX 20XX.

Dining out was regularly at least X times per week with friends and business colleagues in C. This is exactly the same lifestyle to when you were living in your locality in Australia as you would also dine out frequently.

No contributions were made to an Australian Superannuation Fund whilst living in C. There were no contributions made to a C Superannuation Fund as there is no compulsory superannuation in C.

You registered as a non-resident for taxation purposes in Australia for the payment of dividends from E. You also registered with your Australian bank for the 10% withholding tax on any interest paid by the bank.

During your time in C, you complied with the tax regulations of C and lodged tax returns covering the period you resided there with the relevant authority of C.

Maintenance of a Place of Abode

The residential accommodation in C was provided by your foreign employer.

You signed a lease agreement on XX XXXX 20XX in C for F and renewed it yearly. It was initially for a period of X as you were considering moving to another apartment after X months. In the end you decided to renew the lease at F.

The accommodation was not a hotel style or temporary accommodation. You had to pay for essential utilities, such as electricity, water and internet.

The apartment provided to you came furnished; however you purchased additional furniture such as cushions, glassware and kitchenware so that the apartment was homely and comfortable to live in.

The lease was extended by X months at the last extension and not X as you were not certain about your future with D. You wanted to keep your options open. As the business was not doing well, you did not extend the lease to X just in case the employment contract was terminated and you were unable to secure other employment.

Frequency and Duration of Visits to Australia

During the period you were living in C you predominately came to Australia for business purposes.

During the 20XX-XX financial year, you returned to Australia for work purposes and stayed in hotels and had X personal trips to G. One of your personal trips to G you were on your way to and from the A for a holiday. You spent approximately X days in Australia for work purposes and approximately X days for personal leave.

During the 20XX-XX financial year, you travelled to various cities in Australia for business and had one personal trip to G. You spent approximately X days in Australia for work purposes. There was an additional X days for work purposes, with some annual leave days. Accommodation was in hotels during these trips, except when in G, where you stayed in your unit.

During the 20XX-XX financial year, you returned to Australia for business purposes for approximately X days before your employment ceased with the C employer. There were a total of X days in Australia, being made up of X days for work purposes and some annual leave days, plus an additional X days for work purposes. After employment ceased with D, you stayed in Australia from XX XXX 20XX to XX XXXX 20XX (X days) and XX XXXX 20XX to XX XXXX 20XX (X days). You spent more than 183 days in Australia in total this year.

Your employment with the C employer terminated on XX XXXX 20XX. The termination was mutually agreed upon as the business experienced significant downturn. They were not in a financial position to continue with the employment.

After your employment ended with your C employer, you decided to return to Australia and arrived back in G on XX XXXX 20XX.

You are living in the same G unit that you were living in prior to moving to C.

You do not currently have a visa for C.

After working for the employer for X years and X months, you returned to Australia on XX XXXX 20XX.

As at the time of the application for the private ruling you were currently looking for work in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

As a person's liability to income tax is determined on a year by year basis, so too is a person's residency status for tax purposes. Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

·        the resides test

·        the domicile test

·        the 183 day test

·        the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The first two tests are examined in detail in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

The resides test

The ordinary meaning of the word reside, according to the dictionary definition, is to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place.

Residency was discussed in Joachim v. CoT 2002 ATC 2088. In that case it was highlighted that the test is 'whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home'.

You had moved permanently to C, and while you spent some time in Australia for both work and personal purposes, you did not live in Australia according to the ordinary meaning of the word.

In your case you were born in A and are a permanent resident of Australia. You had accepted employment in C. You had leased accommodation in C which was paid for by your employer and the lease was extended for a year in the first instance and then X months on the final occasion. In C you joined some local recreational clubs.

You still have ongoing ties with Australia. You kept Australian bank accounts and maintained a rental lease in Australia, which you resided in when in G, Australia. You also stored your car there whilst you were in Singapore. All of these indicate that you have not abandoned, in a permanent way, your Australian residence.

Therefore you meet the resides test.

The domicile test

If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

'Domicile' is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law.

In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1) of the ITAA 1936, it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency e.g., the end of his or her employment. On the other hand, if that person has in mind only a vague possibility of returning to Australia, such as making a fortune (a modern example might be winning a football pool) or some sentiment about dying in the land of his or her forebears, such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country - see In the Estate of Fuld (No. 3)(1968) p. 675 per Scarman J at pp. 684-685 and Buswell v. I.R.C (1974) 2 All E.R. 520 at p. 526.

In Harding v. CoT [2019] FCAFC 29 the Full Court found that 'permanent place of abode is outside Australia' involves two considerations:

(1)   whether the taxpayer has definitely abandoned, in a permanent way, their Australian residence, and

(2)   whether the taxpayer is living permanently in a specific country, rather than moving between foreign countries.

Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile of choice unless it is established that they have acquired a different domicile of choice or by operation of law. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country eg through having obtained a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

Your domicile of choice is Australia. You had moved to C indefinitely; however there is no evidence that it was your intention to remain there should your employment cease. Therefore, on this basis you would maintain your domicile of choice, being Australia.

Permanent place of abode

The expression place of abode refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.

A permanent place of abode does not have to be everlasting or forever. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

The leading case on whether a permanent place of abode is outside Australia is CoT v. Applegate (79 ATC 4307; (1979) 9 ATR 899). It is clear from Applegate and CoT v. Jenkins 82 ATC 4098; (1982) 12 ATR 745, that a person's permanent place of abode cannot be ascertained through the application of any hard and fast rules. The facts of each case determine the outcome. Paragraph 23 of IT 2650 lists some of the factors that have been considered relevant by the Courts and Boards of Review/Administrative Appeals Tribunal that the ATO uses to determine a taxpayer's permanent place of abode. These being:

(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 bank accounts 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.

Although you were associated with C through living there for work purposes, your associations with Australia were more significant as:

·        you have a leased unit in G that you resided in before, during and after the time you were in C

·        you kept your motor vehicle in Australia at your unit

·        you maintained an Australian bank account

·        you retained your private health insurance in Australia

·        upon termination of your employment on XX XXXX 20XX you did not remain in C

·        you abandoned C to visit Australia the day after your employment ended as you arrived in Australia on XX XXXX 20XX

·        you no longer have a visa for C.

Based on these facts the Commissioner is not satisfied that you had established a permanent place of abode in C. You are considered to be an Australian resident under the domicile test.

The 183 day test

When 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 did not satisfy this test for the 20XX-XX and 20XX-XX financial years as your total duration in Australia was less than 183 days; however for the 20XX-XX financial year, you were in Australia for greater than 183 days.

The Superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

You are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident of Australia under this test.

Conclusion

You were a resident of Australia for taxation purposes as both your domicile of choice and permanent place of abode were in Australia and not C. You have maintained a continuity of association with Australia.