Edited version of private advice

Authorisation Number: 1051708380022

Date of advice: 06 July 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

General

You were born in Country A.

You have been an Australian citizen for many years, where you also retained your citizenship in Country A.

Apart from this you have not been granted permanent residency by any other country.

Between the late 1980s and 20XX you lived and worked in Australia in the public health profession.

In early 20XX you left Australia and commenced working overseas for a couple of international organisations (International organisation 1 from early 20XX to late 20XX) and then International organisation 2 from early 20XX as a specialist within your field of expertise which has continued up until the present day.

Since commencing work with International organisation 2 in 20XX you have spent that time travelling around the world, moving from country to country every few years (having spent time in various continents) to undertake your required working duties.

Since commencing work with International organisation 2, you have not remained in any one country for more than three years.

You have provided a full itinerary for your travel movements and working assignments (full-time employment) with the relevant international organisations as follows:

-       Early 20XX - Late 20XX (a couple of years in total): International organisation 1 in Country B.

-       Early 20XX - Early 20XX (a few years in total): International organisation 2 in Country C.

-       Early 20XX - Mid 20XX (a few years in total): International organisation 2 in Country D.

-       Mid 20XX - present (has been several years to date): International organisation 2 in Country E.

You currently hold a visa which allows you to live and work in Country E for your current posting with International organisation 2, and you have held the same type of visas for all the other work assignments listed above. The visas were supplied by International organisation 2 and they were not permanent visas and they were only valid for the duration of each work assignment.

You had no right to remain in any country when your employment with International organisation 2 ends, which also applies to your current working assignment.

During your working assignments with International organisation 2, you took the following periods of home leave (HL) and family/sick leave (FL) over a lengthy period of many years where you travelled back to Australia to mostly stay with a close friend or with family as indicated (noting that the travel back to Australia had reduced over the most recent years):

-       Late 20XX - early 20XX (a couple of weeks in total) (HL, close friend)

-       Late 20XX - late 20XX (around a week in total) (FL, close friend)

-       Early 20XX - early 20XX (around a week in total) (FL, close friend)

-       Early 20XX - early 20XX (a few days in total) (FL, close friend)

-       Early 20XX - early 20XX (a couple of days in total) (FL, close friend)

-       Early 20XX - early 20XX (around a week in total) (FL, close friend)

-       Mid 20XX - Mid 20XX (around a week in total) (FL, close friend)

-       Mid to late 20XX - mid to late 20XX (around a week in total) (FL, close friend)

-       Late 20XX to early 20XX (a couple of weeks in total) (FL, close friend)

-       Mid 20XX - mid 20XX (a couple of weeks in total) (FL, close friend)

-       Late 20XX - early 20XX (a couple of weeks in total) (FL, close friend)

-       Mid 20XX - mid 20XX (around a week in total) (HL, close friend)

-       Mid 20XX - mid 20XX (a few days in total) (HL, close friend)

-       Mid 20XX - mid 20XX (a couple of weeks in total) (HL, family)

Your family members who were living overseas with you during your work assignments accompanied you back to Australia each time, and Home leave was annual leave, and Family leave was used as sick leave for your spouse's treatment for a serious illness.

You intend on retiring when you turn 65 years of age in mid- 20XX, where you will be returning to Australia permanently.

You have cancelled your Australian Electoral Commission enrolment.

You do not hold Australian private health insurance.

When completing incoming and outgoing passenger cards, you specified your residency status as a 'returning resident'.

Accommodation

You have provided the following schedule relating to the details of your overseas accommodation as it relates to each work assignment with the UN, noting that you did not stay with relatives or friends:

-       Early 20XX - late 20XX (a couple of years in total): International organisation 1, Country B: Employer supplied compound rented apartment.

-       Early 20XX - early 20XX (a few years in total): International organisation 2, Country C: Privately rented house.

-       Early 20XX - mid 20XX (a few years in total): International organisation 2 Country D: Privately rented apartment.

Mid-20XX - present: International organisation 2, Country E: privately rented houses in various cities of Country E as follows:

-       Mid 20XX - mid 20XX (a couple of years in total).

-       Mid 20XX - early 20XX (a few months in total).

-       Early 20XX - mid 20XX (a few months in total).

-       Mid to late 20XX - present.

Regarding the abovementioned accommodation, International organisation 1 provided the rental accommodation for your sole use, which was rented under your name, and International organisation did not provide any rented accommodation.

Before leaving Australia you owned and lived in a property in Australia (199X-20XX - when that property was sold) and subsequent to this you rented Australian properties to live in until you departed Australia in early 20XX.

Assets

You hold a bank account in Australia.

In mid-late 20XX you purchased a house in Australia (the house), as an investment property which was rented out until it was sold many years later in late 20XX.

You have not purchased a property in any other country, and you intend on purchasing another property here in Australia in the near future, once your children's University intentions are clear.

You have a superannuation account in Australia.

Prior to our departure in 20XX you mostly sold or gave away your household effects, and you took some with you, and you retained your personal effects with you throughout.

You have been receiving Australian rental income from the house which you have declared in your Australian income tax returns.

You have always provided your current overseas address to your Australian financial institution to enable correspondence to be sent to you.

You own the following overseas assets:

- Bank accounts.

- Credit card.

- Motor vehicle purchased 2nd hand.

- Household goods purchased: beds, furniture, kitchen appliances, TV etc until present.

You have not lodged any foreign income tax returns while you have been living overseas.

Family and social connections

You have been widowed since early in 20XX.

Your late spouse accompanied you overseas (apart from a period between 20XX to 20XX where she was treated in Australia during her illness) until their death in early 20XX.

You have five children, two of which live in Australia, and three of which live with you during your postings with International organisation 2 (currently that is in Country E).

Your children are all Australian born, with the youngest three living with you, and the oldest two of adult age living in Australia (which they have done since they completed college).

Your children who are currently living with you all have visa's which allow them to stay with you in the Country E and it is only a right of stay whilst you remain working for International organisation 2.

On the termination of your employment with International organisation 2 you and your children must return to Australia, and you intend on retiring from work and living in Australia permanently from that point onwards.

You have not maintained any professional, social or sporting connections with Australia.

You have not established any professional, social or sporting connections overseas.

You have obtained a driver's licence in Country E.

You have maintained a professional membership in Australia.

Employment

You have been working for International organisation 2, having been employed with them on a continuous basis for many years, and you are able to continue working for them until your planned retirement when you turn 65 years of age.

You have never been employed by the Commonwealth of Australia.

You are not a member if the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse of a person who is a member of the PSS or an eligible employee of the CSS.

You do not have a position or job being held for you in Australia.

Because of the nature of your work with International organisation 2, you have an amount deducted from your wages being a 'staff assessment' for each pay period, and a proportion of that is repatriated to your country of origin, and for the past 13 years that has been Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

Detailed reasoning

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, in regard 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:

·         the resides test,

·         the domicile test,

·         the 183 day test, and

·         the superannuation test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.

The resides (ordinary concepts) test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(i)               Physical presence in Australia

(ii)              Nationality

(iii)             History of residence and movements

(iv)             Habits and "mode of life"

(v)              Frequency, regularity and duration of visits to Australia

(vi)             Purpose of visits to or absences from Australia

(vii)           Family and business ties to different countries

(viii)          Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

In your case:

·         Whilst you will have a remaining connection with Australia through your two adult age children, you do not have a permanent place of abode in Australia.

·         You have been living and working overseas (where you have been working for international organisations) since early 20XX, having spent only minimal time in Australia in each year since that time, where you came back for the purpose of visiting family and friends.

·         You spent a few days in total in Australia during the 2017-18 financial year where you stayed with your friend and visited your adult children.

·         You hold a type of visa which allows you to live and work in Country E (where you are completing your current working assignment with International organisation 2) but only for the duration of your working assignment.

·         You intend on remaining living and working with the International organisation 2 overseas until your planned retirement (when you turn 65 years of age).

·         Your three youngest children have remained living with you overseas during your working assignment with International organisation 2.

·         You hold a current driver's licence in Country E.

·         In late 20XX you sold your Australian rental property.

·         Since commencing work with International organisation 2 (in early 20XX), you have rented private accommodation for you and your three youngest children to live in. However, in mid to late 20XX you purchased a residential property in Country E for you and your three youngest children to reside in.

·         You have a home loan in Country E which you took out to purchase the property in Country E

·         You own assets overseas including household furniture and appliances, bank accounts, credit card and a motor vehicle.

·         You hold a superannuation account and a bank account in Australia.

Whilst we acknowledge that you do have some connections to Australia, these are outweighed by the connections you have overseas.

As such you are not residing in Australia according to the ordinary meaning of the word. Therefore, you do not meet the 'resides test' and you are a non-resident of Australia for tax purposes under this test.

However, you will be an Australian resident if you meet the conditions of any of the remaining tests.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982).

As such, in order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country, and this intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

In your case you were born in Country A, and you also became an Australian citizen in late 199X, where you also retained your citizenship in Country A. This meant that your domicile had changed from the Country A to Australia in mid to late 199X.

As such you are an Australian citizen and since mid to late 199X you have not taken any legal steps which would have proven an intention to change your Australian domicile to any other Country. As such you have therefore retained your Australian domicile.

Therefore, you will be a resident of Australia under this test unless the Commissioner considers you have established a permanent place of abode outside of Australia.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

(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.

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.

If an individual with a usual place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another, any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or permanent place of abode outside Australia. This would also include situations where an individual lives and works on a cruising yacht. In such a case, if the person could not be said to have acquired a domicile of choice or permanent place of abode outside Australia, the taxpayer would be considered to be a resident of Australia.

This concept was further explored in Harding v Commissioner of Taxation (2019) FCAFC 29 (Harding), where Davies and Stewart JJ stated at paragraph 40 that in reference to the term "permanent place of abode", the word "place" should accordingly be read as only including a reference to a particular country or state.

Further, the Full Court found in Harding at paragraphs 36 and 40 that "permanent place of abode outside Australia" involves two considerations as follows:

1)    Whether a 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.

In consideration of the factors above, along with your overall circumstances, the Commissioner is satisfied that you have a permanent place of abode outside of Australia based on the following:

·         You have been living and working overseas (where you have been working for international organisations) since early in 20XX, having spent only minimal time in Australia in each year since that time, where you came back for the purpose of visiting family and friends.

·         You spent a few days days in total in Australia during the 2017-18 financial year where you stayed with your friend and visited your adult children, and the remainder of the year was spent living and working in Country E for your current working assignment with International organisation 2.

·         Whilst you will have a remaining connection with Australia through your two adult age children, you do not have a permanent place of abode in Australia.

·         Your three youngest children have remained living with you overseas during your working assignment with International organisation 2.

·         Since commencing work with the International organisation 2 (in early 20XX), you have rented private accommodation for you and your three youngest to live in. However, in mid to late 20XX you purchased a residential property in Country E for you and your three youngest children to reside in.

·         You hold a type of visa which allows you to live and work in Country E (where you are completing your current working assignment with International organisation 2) but only for the duration of your working assignment.

·         You have a home loan in Country E which you took out to purchase the property in Country E.

·         You own assets overseas including household furniture and appliances, bank accounts, credit card and a motor vehicle.

·         You intend on remaining living and working with International organisation 2 until your planned retirement when you turn 65 years of age.

Therefore, despite the fact that your domicile is Australia, as the Commissioner is satisfied that you have established a permanent place of abode outside of Australia, you are not a resident of Australia under the domicile test of residency.

The 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.

You will not be in Australia for more than 183 days during the 20XX-XX financial year.

As such you are a non-resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You are not eligible to contribute to the relevant Commonwealth super funds, nor are you the spouse of such a person.

As such you are not a resident under this test.

Your residency status

As you have failed all four tests of residency you are not a resident of Australia for income tax purposes for the 20XX-XX financial year under subsection 6(1) of the ITAA 1936.