Edited version of private advice

Authorisation Number: 1051777869449

Date of advice: 22 December 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes after departing Australia in early 20XX?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country B and married there. You and your spouse have X children.

You relocated to Australia in mid 19XX. You obtained permanent residence status and then Australian citizenship in early 20XX. As result of your birth you also hold a Country B residency card which allows you to reside that country.

During your time living in Australia you travelled extensively to perform your role with your employers. You travelled to Region 1, Region 2 and Region 3 for business purposes.

During this time your spouse was the primary carer for your children due to the demands of your various positions with various employers. They were also responsible for arranging the educational and social activities of the children, school events and other sporting events. They also liaised with various tradesmen (when required) paid household bills and managed the household affairs to allow you to concentrate on your career.

You accepted a redundancy from an employer in late 20XX. As there were limited opportunities for employment in your field in Australia you sought employment elsewhere.

You departed Australia a few months later as an Australian citizen to take up a permanent role with an employer in Country A.

Upon departure you intended to reside in Country A on a permanent and indefinite basis and not to return to Australia soon. You plan to spend the final part of your career there prior to your retirement; a date for which has yet to be set.

Your employment is ongoing, permanent and likely to be for an indefinite period.

You hold a valid 2-year employment visa, which is typical for expatriates living and working in Country A. This visa was supplied and sponsored by your employer.

Your pay is deposited into a local bank account. To facilitate this, you have opened a local bank account.

You are paid all required payments as mandated by local law.

You reside in a long-term leased and furnished apartment in which is renewed on an annual basis. This apartment is equipped with all facilities as would be expected in a permanent home. This includes a fully equipped kitchen.

Due to issues with children's education, your family were obliged to remain in Australia. You therefore moved your personal possessions to Country A and took up a lease on a furnished apartment. If your family moves to join you, your family furniture may be removed at that time.

Upon departure you packed all individual and personal belongings and relocated these.

You purchased a local mobile phone which has a contract with a local communications company.

You have also purchased a vehicle which is garaged at your apartment.

You have arranged a local driver's license.

You sold your investment property in Australia before departure.

Your spouse remained in Australia occupying your family home, which is jointly owned by them and yourself.

Your children have also remained in Australia.

You also own a family home in Country B which was occupied by your parents. Your father has passed away and your mother has moved to live with your sister.

You have also purchased another property in Country B which is yet to be built.

You do not own Australian property apart from your share of the family home.

You have no material assets or investments in Australia as you sold your vehicle before departure However, you retain an Australian superannuation fund to which you make modest monthly contributions in order to maintain your life insurance within the policy.

You retain some joint bank accounts in Australia with your spouse which they used for routine living costs.

You have advised the Australian Electoral Commission of your departure and have asked that your name be removed from the voting rolls.

You have not informed Medicare of your departure.

You have maintained your Australian private health insurance policy and are also eligible for a medical and accident insurance policy provided by your employer. Your family utilise your Australian private health insurance, while you rely upon the Country A policy for your health needs.

You do not intend to return to Australia except for school holidays. During the period of this ruling you returned to Australia on X occasions for periods of between Y and Z days per visit. These visits were visit your family.

You have recently returned to Australia and have entered quarantine. Once quarantine is completed you will re-join your family to celebrate a wedding anniversary and the Christmas holidays.

You expect your family to join you in Country A in early 20XX once your child completes year 12 studies and subject to pandemic travel restrictions allowing such travel.

Your spouse and one child have applied for 2-year residency permits to live with you. However, they have not as yet moved due to educational issues. It has also been difficult to travel given current pandemic travel restrictions.

You provide financial support for your spouse and assist them to pay medical bills. You transfer approximately $XXX per month to your family to assist with family living expenses, education costs and mortgage payments.

After making these transfers you retain approximately $YYY per month for your own living expenses.

You ceased membership of professional and social groups in Australia before departure. You have established professional and social relationships in Country A and regularly socialise with local friends.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs 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

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', regarding 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 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 early 20XX.

During your time overseas you travelled to Australia on X separate occasions to maintain family relationships and holiday.

This subject is addressed in Taxation Ruling 98/17 (TR98/17) Income tax: residency status of individuals entering Australia. At paragraphs 20 and 21 it states -

20. All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:

•         intention or purpose of presence;

•         family and business/employment ties;

•         maintenance and location of assets; and

•         social and living arrangements.

21. No single factor is necessarily decisive, and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Your intention upon departure was to work in Country A on a permanent and indefinite basis.

You maintained strong family ties with Australia and nurtured these ties with regular visits and by providing monthly financial support to your family.

Your spouse maintains a family home in Australia where you stay when in Australia. You relocated all personal belongings to Country A when you departed.

You have established an abode in Country A where you stay in rental accommodation with a 1-year lease. The apartment is supplied as a fully furnished apartment.

You have established professional, social or sporting connections in Country A and have withdrawn from those in Australia - apart from your family relationships.

You are considered a resident for tax purposes under the resides test after departure because -

•         You are maintaining an enduring association with Australia via an abode in Australia which remains available to you

•         You maintain strong family ties with Australia

•         You support your Australian family financially

•         You continue to jointly own a residential property in Australia.

Your circumstances taken together lead to a conclusion that you are a resident under this test.

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.

Your domicile of origin was Country B however you changed to a domicile in Australia when you applied for and obtained Australian citizenship.

In your case, you are a citizen of Australia. You have left Australia and have chosen to live in Country A. You have not been granted, nor have you actively sought, permanent residency in any other country; although you retain the right to reside in Country B.

You have not abandoned your domicile in Australia and acquired a domicile of choice in Country A as you do not yet have the right to reside permanently in that country. This is because you have not yet actively applied for, nor been issued, a visa that will allow you or to remain there indefinitely.

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

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 not established a permanent place of abode outside of Australia as:

•         You left a residential home in Australia, and it remains available to you.

•         You have not set up an established home with family in Country A despite substantial time to do so.

•         You have visited Australia several times since your departure to maintain family connections and expect to continue with such visits in future years.

•         Your family remains in Australia, occupying the family home.

You intend living in Country A for a considerable and indeterminable time. However, you have not abandoned your residence in Australia nor your connections to Australia. Your Australian residence is still available to you, and you have retained a durable association with Australia, through your family who remained in Australia.

The duration and continuity of your presence in Country A supports the argument that you established a long-term place of abode outside Australia. Your intended duration in Country A indicates permanency. However, this does not outweigh the enduring association and connection you still have, and maintain, in Australia.

You have maintained a strong association with Australia through family relationships, continuing to financially support your spouse and not advising Medicare of your departure. These suggest that you have established a long-term abode in Country A while maintaining enduring associations and connections with Australia. You have not abandoned your association with Australia.

Consequently, the Commissioner is not satisfied that you have a permanent place of abode outside Australia, and you are therefore a resident under the domicile test of residency during the period in Country A.

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.

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 two of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you remain a resident of Australia for income tax purposes after departing Australia.