Edited version of private advice

Authorisation Number: 1051765904288

Date of advice: 3 November 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes from the date you departed Australia?

Answer

No.

This ruling applies for the following period:

Income year ended 30 June 20XX

Income year ending 30 June 20XX

Income year ending 30 June 20XX

Income year ending 30 June 20XX

Income year ending 30 June 20XX

Ruling commenced

January 20XX

Relevant facts and circumstances

You and your family

You were born in foreign country A.

You are married to your spouse.

You and your spouse have adult children who are independent.

You have other family members who reside in Australia.

You together with your spouse, emigrated from Australia and took up residence in foreign country B.

Your intention is to reside, together with your spouse, in foreign country B permanently and to make your home there. You will renew your visa as required. You have no intention to return to Australia to live and/or work in the foreseeable future.

Your family will either visit you in foreign country B or you will make occasional trips to Australia to visit them, with the aggregate duration of those trips being less than 183 days in any income year.

Citizenship and passports

You are a citizen of both foreign country B and Australia. You hold a current foreign country B passport and a current Australian passport. You are not a citizen of any other country and do not hold a passport issued by any other country.

Education and qualifications

You were educated in Australia and hold a graduate degree from an Australian university.

Career

You began your career in the 19XXs. That role was based in Australia.

In pursuance of your career, you accepted a position with employer 1, which required you to relocate from Australia to foreign country B. This was your first, full-time role outside of Australia.

For several years, you lived and worked as a professional outside of Australia.

You took up residence in Australia in the early 20XXs after accepting a role with employer 2 and you continued to live and work there for several years.

You then accepted a position in foreign country B with the same employer. You lived and worked in foreign country B for a few years until you returned to Australia.

For several years, you held various roles with the same employer which were all based in Australia.

You received and accepted an offer of employment from employer 3. As a condition associated with accepting the role, you were to be based initially in foreign country C, but ultimately foreign country B, for the purposes of employment. You currently retain this role and reside in foreign country B.

You were appointed as a director of employer 3.

A copy of your Curriculum Vitae is attached to your application.

Intention

Prior to leaving Australia, you arranged:

(a)          the sale of your motor vehicle;

(b)          the rental of the property owned by your spouse;

(c)          the cancellation or transfer to the tenant of the utility accounts for the rental property;

(d)          for your mail to be redirected to foreign country B;

(e)          the cancellation or non-renewal of your various Australian-based subscriptions/memberships of clubs and societies.

(f)           the cancellation of Australian bank accounts and credit cards except for those needed to receive dividends on the shares you hold in an Australian company, and to pay bills related to the rental property; and

(g)          going away parties with friends and family.

You have also arranged:

(a)          the notification of your departure to Medicare;

(b)          the cancellation of your private health insurance; and

(c)           the removal of your name from the Australian electoral roll.

Situation in foreign country B

Employment

You accepted an offer of employment to join employer 3. As a condition associated with accepting the role, you were to be based initially in foreign country C for the purposes of employment.

A copy of your Contract of Employment with employer 3 is attached to your application.

Under that contract:

(a)          you were appointed to a role COO with employer 3;

(b)          your initial place of work was to be at the foreign country C office of employer 3;

(c)           it was contemplated that you would transfer to foreign country B upon being granted an employment visa for foreign country B; and

(d)          you received options to subscribe for X% of total ordinary shares in employer 3 which will vest after X months of service to employer 3.

Later, you entered into another, separate employment contract with employer 3.

The other Contract of Employment with employer 3 is attached to your application.

Under the other Contract of Employment:

(a)          your place of work was to be at the foreign country B office of employer 3;

(b)          you were to commence work in foreign country B a specified date;

(c)           the term of your employment is indefinite in that there is no termination or completion date;

(d)          your employment was subject to your possession of a valid visa from the government of foreign country B to reside and work in foreign country B;

(e)          you were to be paid a basic annual salary of USD $X paid on a monthly basis; and

(f)            you will be eligible to receive a cash incentive award or a share award as part of employer 3's share and annual bonus scheme.

You officially commenced employment with employer 3 on a specified date and, following a brief stint working in the foreign country C offices of employer 3, you commenced working in the foreign country B offices of employer 3 on a specified date.

At all times, you considered living and working in foreign country C as a transitory arrangement prior to moving permanently to foreign country B where you would live and work indefinitely. When in foreign country C, you stayed at a hotel.

In addition to remuneration in the form of salary and wages, you are entitled to participate in employer 3's share option scheme. The majority of your remuneration will be driven by options to acquire shares in employer 3. That option will vest after you have completed a specified period of continuous employment. Once vested the option shall be exercisable.

You expect to continue in your current role with employer 3 for a minimum period of years when you will be entitled to exercise the options. Your continued employment with employer 3 after this time will depend on the success of the company.

In your capacity your current job has the following responsibilities as detailed on the Contract of Employment:

(a)          leading and managing the functions of more than X staff;

(b)          designing and enhancing business operations strategy and policies;

(c)           representing the business on any regulatory liaison and ensuring the business complies with relevant regulations and internal policies;

(d)          develop high quality business strategies and plans ensuring their alignment with short-term and long-term business and market objectives;

(e)          oversee all operations and business activities to ensure they produce the desired result and are consistent with the overall strategy and mission;

(f)            enforce adherence to legal guidelines and in-house policies to maintain the company's legality and business ethics;

(g)          review financial and non-financial reports to devise solutions or improvements;

(h)          build relations with key partners and stakeholders;

(i)            analyse problematic situations and occurrences and provide solutions to ensure company survival and growth;

(j)            endure the development and maintenance of a comprehensive set of systems, policies, standards and procedures to ensure that employer 3 can operate efficiently and effectively whilst remaining compliant with legislation; and

(k)           develop and maintain a range of effective relationships with all key stakeholders in order to acquire and sustain the support necessary to build the business and services over time.

Visa in foreign country B

You currently hold an employment visa issued by the government of foreign country B which entitles you to remain in foreign country B until a specified date. It is generally renewable everyone to few years.

Your current visa is not due for renewal until a future year 20XX. You believe that the renewal of your visa a formality whilst you remain under the employ of your current employer, employer 3.

Accommodation

Upon emigrating to foreign country B, you and your spouse took up residence in a serviced apartment.

You and your spouse moved into a private residence. You have executed a tenancy agreement in respect of that property, under which you will let the property for a specified period.

This property is your current home and you and your spouse have moved all your important possessions, collections, family heirlooms and other personal effects to this property. It is where you will eat, sleep and live. It is furnished to a good standard including kitchen appliances, a fridge, microwave, cooker, sofa, table, chairs, bed, cupboards and washing machine. All your mail will be sent to this residence. You and your spouse hold contents insurance with a local insurer.

You will at all times maintain a home in foreign country B for yours and your spouse's exclusive use and enjoyment. On any occasion where you and your spouse are traveling and not in foreign country B, you will lock the residence and take the keys with you.

Utilities and other accounts

You have entered into contracts for necessary utilities with local foreign country B authorities including electricity and water. You have also set up a mobile phone account and maintain home internet and telephone.

These expenses are issued to you and will be paid from your personal bank account.

Meals and household chores in foreign country B

You and your spouse cook your own meals and do your own grocery shopping at the local shops in foreign country B.

You will attend to normal household chores such as washing, hanging up to dry and putting away your clothes, changing your bed linen, vacuuming, cleaning and drying dishes, tidying up and general household cleaning.

Medical treatment in foreign country B

When medical treatment is required you will attend your local general practitioner in foreign country B. You hold a comprehensive private medical insurance policy for expats.

Transport/motor vehicle in foreign country B

You and your spouse leased a private motor vehicle for your transport needs in foreign country B and have considered buying a motor vehicle for your own use.

Social life in foreign country B

You regularly participate in sporting activities in foreign country B. You are a member of sporting clubs situated there. You are also an active member of a society and will be attending events held by them there.

You and your spouse have a large social network in foreign country B. This was established during the previous time that you and your spouse lived there as well as friends that have moved there since. You regularly invite them to your home for meals and social gatherings. Likewise, your friends invite you to their homes for meals and social gatherings. You socialises with friends in the usual way including eating out and attending local events.

Bank Accounts in foreign country B

You have set up and will maintain a bank account and have been approved for a credit card in foreign country B

Your employment income is deposited into this account each month by employer 3 in the local currency as specified in your Contract of Employment. You will continue to use a combination of your bank account and credit card to cover your general living expenses, daily personal expenses as well as any one-off purchasers that may be required from time to time.

You have also set up a finance account in foreign country B.

Situation in Australia

Property

Prior to departing Australia, you and your spouse lived in a property. This property is owned by your spouse and is now leased out to tenants. All utilities in yours or your spouse's have been cancelled or transferred to the tenants. Your spouse holds landlord insurance for the property. It is yours and your spouse's intention to treat the property as an investment and continue renting it for the foreseeable future.

You and your spouse do not have access to the property and do not own or lease any other accommodation in Australia. All your mail has been forwarded by post to your home in foreign country B.

Assets in Australia

You have the following assets in Australia:

(a)          Shares; and

(b)          A collection held in storage.

You sold your car prior to departing Australia. All assets you owned or owns have been sold, donated or taken with you to foreign country B.

Bank Accounts in Australia

You hold the following bank accounts in Australia: bank 1 account and bank 2 account.

The bank 1 account is used to receive dividends from the shares. You have closed or are in the process of closing all other Australian bank and credit card accounts.

Australian Superannuation

You are a member of an Australian self-managed superannuation fund.

You are also a director of the trustee company for the fund

You intend to resign as a director and wind up the superannuation fund within X months of ceasing to be resident of Australia for Australian taxation purposes.

Health insurance in Australia

You have cancelled your Australian private health insurance. You have also notified Medicare of your departure from Australia.

Voting

You and your spouse have requested that their names be removed from the Australian electoral roll. Consequently, you and your spouse are no longer be registered to vote in Australia.

Trips to Australia

Purpose and Regularity

You intend to make occasional trips to Australia to visit your family members and friends. The estimated aggregate duration of those trips will be less than 183 days any income year. It is estimated that your family members will visit you in foreign country B at a similar frequency.

Accommodation

You intend to stay at your parent's house when you visit there. When visiting other family members or friends in or elsewhere you intend to stay in hotels or Airbnb accommodation.

Transport

When you travel to Australia, you intend to hire a car. You may also rely on a combination of goodwill from family members, taxis and public transport.

Immigration Passenger Cards

When visiting Australia, you will indicate on your outgoing and incoming immigration that you are a visitor or temporary entrant.

Physical presence

The total number of days you were in Australia for the income year ended 30 June 20XX was less than 183 days.

In January 20XX, you took up residence in foreign country B.

You were not physically present in Australia at any time during the period from the date of your departure for foreign country B.

On the basis that you did not return to Australia to visit or otherwise since you departed Australia, you spent X days in Australia and X days outside Australia (predominately, in foreign country B) during the 20XX Year.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

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

Reasons for decision

Summary

You are not an Australian resident for tax purposes under any of the four tests of residency.

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, if you are a foreign resident, your assessable income includes only income derived from an Australian source (subsection 6-5(3) of the ITAA 1997).

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. These tests are:

1.    the resides test

2.    the domicile test

3.    the 183-day test

4.    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.

1. The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

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'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:

(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 with Australia compared to the foreign country concerned; and

(viii)  maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

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 involuntary, 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, together with an intention to return to that place and an attitude that the place remains home.

Further, in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA, the Tribunal stated (at 62):

Physical presence in a country for some period during a particular year of income is usually considered by the courts as necessary in order that a person should be resident in that country during that particular income year. However, there have been exceptions to this: Rogers v Inland Revenue Commissioners (1879) 1 TC 225 and Slater v Commissioner of Taxation (NZ) (1949) 9 ATD 1.

In your case, during the period commencing on 1 July 20XX up to and including your departure date, you made several overseas trips mainly to foreign country C. During this time, you were in present in Australia for less than 183 days.

In January 20XX, you took up residence in foreign country B and did not return to Australia during the remainder of the 20XX income year. The total number of days in Australia for the income year ended 30 June 20XX was less than 183 days.

(ii) Nationality

You are a duel citizen. You were born in foreign country A and retain foreign country A citizenship. You emigrated to Australia and became an Australian citizen.

(iii) History of residence and movements

You lived and worked in Australia prior to leaving Australia to take up residence in foreign country B.

(iv) Habits and 'mode of life'

Your intention is to live, together with your spouse, in foreign country B permanently and to make your home there. You have no intention to return to Australia to live or work in the foreseeable future. Your employment there is ongoing and there is no termination or completion date in your employment contract.

You have established a residence there in rented accommodation on a tenancy agreement. This property is your current home and you and your spouse have moved all your important possessions there and is where you will eat, sleep and live. It is fully furnished. You and your spouse taken out contents insurance with a local insurer. All your mail will be sent to this residence. You will maintain this yours and your spouse's exclusive use and enjoyment. When you and your spouse are traveling, you will lock the residence and take the keys with you. You have no home in Australia. The property owned by your spouse in which you used to live is now rented to tenants. When visiting Australia, you intend to stay at your parent's house, with other family members, with friends or in rented accommodation.

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

You intend to make occasional trips to Australia to visit your family members and friends for less than 183 days any income year. Your family members will visit you in foreign country B at a similar frequency.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is to live and work in foreign country B on an employment contract with no end date. Your visits to Australia will be short term visits to family and friends.

(vii) Family, business and financial ties

Family

Your live with your spouse in foreign country B. Your children are all adults and live independently of you in Australia. A parent lives in Australia.

Business or economic

You have taken up an employment contract in foreign country B for an indefinite period. You have no plans to return to live and work in Australia and have no job being held for you in Australia.

Assets

You own shares and a collection in Australia. You hold bank accounts in Australia to manage your shares and receive dividends. You have closed or are in the process of closing all other Australian bank and credit card accounts. You sold your car prior to departing Australia. All other assets have been sold, donated or taken with you to foreign country B. You are a member of an Australian self-managed superannuation fund. You intend wind up the fund within X months of ceasing to be resident of Australia.

(viii) Maintenance of a place of abode in Australia

You are living in accommodation in foreign country B on a lease. Your spouse's house in Australia is rented and is not available for you to live in.

Summary of the resides test

As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive, and the term 'reside' should be given a wide meaning.

In your case, there are various factors that indicate that you have ceased to be a resident of Australia from the date of your departure.

You moved to foreign country B with your spouse to take up employment on a contract with no end date. You have established a home there with her in rented accommodation and have moved most of your possessions there. You intend visiting to Australia for fewer than 183 days in any income year. You maintain some assets in Australia such as your superannuation, private health insurance and a bank accounts but you are progressively severing these ties; except your collection.

Based on the facts of your case, the Commissioner accepts that you ceased residing in Australia according to the ordinary meaning of the word 'reside' upon your departure from Australia and you will not retain a continuity of association with Australia for the future years of the ruling.

Therefore, you are not a resident of Australia under the 'resides' test of residency.

2. The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

The concept of Domicile was discussed in the Marriage of Emson (1980) 5 Fam LR 662:

A person may abandon his domicile of origin and acquire a domicile of choice but in order to establish a change of domicile there must be clear evidence of an intention to abandon the domicile of origin and to make a new permanent home in the country to which the person has removed. In my view a person cannot be said to acquire a new domicile until there has been a firm intention of establishing a permanent residence in another country and also the confirmation of that intention by actual residence in that country.

Declarations as to intention are rightly regarded in determining the question of a change of domicile, but they must be examined by considering the person to whom, the purposes for which, and the circumstances in which they are made and they must further be fortified and carried into effect by conduct and action consistent with the declared expression:

Ross v Ross [1930] AC 1 at 6-7 per Lord Buckmaster... Where the court finds that at a relevant point of time there is a conflict between the actual conduct of the party concerned and the verbal expression of his intention doubtless the court will in most cases prefer the act to the word - as an ancient proverb puts it: "what you do speaks so loudly that I cannot hear what you say."

Further, in Fremlin v Fremlin (1913) 16 CLR 212; [1913] HCA 25 (Fremlin v Fremlin) Per Barton J:

In Winans v. Attorney-General, Lord Halsbury L.C. said:-"Now the law is plain, that where a domicile of origin is proved it lies upon the person who asserts a change of domicile to establish it, and it is necessary to prove that the person who is alleged to have changed his domicile had a fixed and determined purpose to make the place of his new domicile his permanent home." In the much older case of Udny v. Udny Lord Westbury said: -"Domicile of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. This is a description of the circumstances which create or constitute a domicile, and not a definition of the term. There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation. It is true that residence originally temporary, or intended for a limited period, may afterwards become general and unlimited, and in such a case so soon as the change of purpose, or animus manendi, can be inferred the fact of domicile is established." Lord Curriehill in the case of Donaldson v. M'Clure says: -"To abandon one domicile for another means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges and immunities which the law and constitution of the domicile confer on the denizens of the country in their domestic relations, in their business transactions, in their political and municipal status, and in the daily affairs of common life, but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence." Lord Halsbury, in Marchioness of Huntly v. Gaskell, expressed strong approval of Lord Curriehill's judgment, quoting this passage.

You are a citizen of both foreign country A and Australia. Your domicile of origin is foreign country A because you were born there. You emigrated to Australia and adopted Australian citizenship and, in so doing, you made Australia your domicile of choice. As you have not taken steps to make another country your domicile, your domicile is Australia and remains unchanged while you are in foreign country B.

Permanent place of abode

The expression permanent 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 persons 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 the person intends to live for the rest of his or her life. It should be contrasted with a temporary or transitory place of abode outside of Australia.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) outlines some of the factors considered relevant in determining a person's place of abode. These are summarised at paragraph 23 in the ruling as:

• the intended and actual length of the individuals stay in the overseas country (a period of two years or more in a country would generally be regarded as a substantial period)
• any intention either to return to Australia at some definite point in time or to travel to another country
• the establishment of a home outside of Australia
• the abandonment of any residence of place of abode the individual may have had in Australia
• the duration and continuity of the individuals presence in the overseas country, and
• the durability of association that the individual has with a particular place in Australia.

You are with your spouse in foreign country B rented accommodation which you have established as your home. You have no home in Australia. You are employed there on a contract with no end date and have no intention of returning to Australia except for short visits to family and friends.

Although Australia remains your domicile of choice, the Commissioner is satisfied they have a permanent place of abode outside of Australia.

You are not resident of Australia for tax purposes under the domicile test of residency.

3. The 183-day test

Where a person is present in Australia for 183 days during a 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 case, you were not physically present in Australia for more than 183 days in the 2020 income year and will not be in any of the future years of the ruling.

You are not a resident of Australia under this test.

4. The superannuation test

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

In your case, you are not a member of the CSS or the PSS or a spouse of such a person, or a child under 16 of such a person.

You are not a resident of Australia under this test.

Your residency status

You are not a resident of Australia for income tax purposes from the date of your departure and for the future income years of the ruling.