Edited version of private advice

Authorisation Number: 1051763613157

Date of advice: 8 October 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2019

Year ending 30 June 2020

Year ending 30 June 2021

Year ending 30 June 2022

The scheme commences on:

1 July 2018

Relevant facts and circumstances

You are a citizen of Australia and Country A who left Australia for the Country B in Spring 2018 to live and work in the Country B. No visa was required for you to relocate or to work as you hold a Country A passport.

You are single with no spouse or children.

In early 20XX you relocated to Country C to take up full-time employment with a local company. Your employment contract specifies that this employment is for an unlimited period.

Your employer assisted you to apply for an employer sponsored visa, which is valid until early 20YY. You also hold a residency card and a driving licence.

Your intention upon departing Australia was to indefinitely leave Australia. However, an opportunity arose in Country C and you pursued this until you were offered employment there.

You reside in long term accommodation provided by your employer.

You did not own any Australian property and were renting before departing Australia. You ended your lease, spend several weeks with family and then departed Australia.

You gifted or sold your furniture before departure. You also stored some personal items with family. You took other personal items with you on departure.

You advised the Australian Electoral Commission of your departure as well as Australian banks. You closed your investment account in Australia. You retain two Australian bank accounts which are rarely used.

You have not retained any professional, social or sporting connections with Australia but have jointed three clubs in Country C - a social group, a sporting club and a networking group.

While working in the Country B you lodged tax returns with the local tax authority. In Country C this is not required. You intend to continue to lodge Australian non-resident income schedules as you retain an education debt.

You have established a local bank account, have purchased minor whitegoods and rent a personal vehicle on a monthly basis.

You have never been employed by the Australian Commonwealth government and hence do not belong to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for Decision

Detailed reasoning

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

·   the resides test,

·   the domicile test,

·   the 183 day test, and

·   the superannuation test.

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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides Test

When considering the resides test the following factors are normally considered:

·   physical presence

·   intention or purpose

·   family or business ties

·   maintenance and location of assets

·   social and living arrangements

In your case, you are a citizen of Australia who departed Australia in 201Y with the intention of indefinitely leaving Australia.

In all other respects you have severed your normal links and associations with Australia.

You are a non-resident for tax purposes under the resides test after departure in August 201Y. You are not considered to have maintained an enduring association with Australia as you have no abode in Australia and have severed almost all normal links and associations with Australia.

The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person's domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you are a citizen of Australia. You have left Australia and have chosen to live in both the Country B and Country C. You have not been granted, nor have you actively sought, permanent residency in any other country but such is not required as you hold a passport which allows you free entry to other countries.

You have not acquired a domicile of choice in the Country B as you only remained there from late 201Y until early 202X.

You have not acquired a domicile of choice in the Country C as you only hold a visa which allows the right to reside in that country until 202Y and you have not applied for a migration visa or permanent residency. Accordingly, as noted in your application, you have an Australian domicile.

Therefore, you will be an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Permanent place of abode

A person's 'permanent place of abode' is a question of fact to be determined in the light of all the circumstances of each case. (Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (Applegate))

In Applegate, the court found that 'permanent' does not mean everlasting or forever, but it is to be contrasted with temporary or transitory.

The courts have considered 'place of abode' to refer to a person's residence, where he lives with his family and sleeps at night.

Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia (IT 2650) provides a number of factors which are used by the Commissioner in reaching a satisfaction as to an individual's permanent place of abode. These factors include:

(a)          the intended and actual length of the individual's stay in the overseas country;

(b)          any intention either to return to Australia at some definite point in time or to travel to another country;

(c)           the intended and actual length of the individual's stay in the overseas country;

(d)          any intention either to return to Australia at some definite point in time or to travel to another country;

(e)          the establishment of a home outside Australia;

(f)            the abandonment of any residence or place of abode the individual may have had in Australia;

(g)          the duration and continuity of the individual's presence in the overseas country; and

(h)          the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer's children, family ties.

Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors.

In your case it is considered that you have established a permanent place of abode outside of Australia as:

·   You have no permanent home in Australia which is available to you.

·   You have established long term, albeit employer provided, accommodation in Country C which you have begun to furnish from local providers.

·   The main reason you left Australia was an intention to leave Australia indefinitely.

·   You have visited Australia since your departure to maintain a family connection and both visits were short-term only. You intend to spend limited time in Australia henceforth.

You intend living in the Country B and Country C for a considerable and indeterminable time. You have taken some personal belongings and you have abandoned your residence and severed most links and connections to Australia.

Consequently, the Commissioner is satisfied that you have a permanent place of abode outside Australia, and you are therefore a non-resident under the domicile test of residency during the period you will live overseas.

The 183 days 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.

In your circumstances you anticipate travel to Australia for brief visits after your departure. You are not a resident for tax purposes under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector 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 contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You are not a resident for tax purposes under this test.

Residency status

As you satisfy none of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are non-resident for income tax purposes after departing Australia.