Edited version of private advice

Authorisation Number: 1051780109107

Date of advice: 7 December 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes from your departure date?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Australia.

You are a resident of a foreign country. You intend to live and work in a foreign country until the end of 2022. At the conclusion of the event, you may:

• remain in a foreign country; or
• be deployed to a new host country; or
• return to Australia.

You have a valid renewable work permit and a residency visa for a foreign country.

You were deployed to a foreign country on a date with a company until a specified date.

You were (and remain) employed by them.

A company in a foreign country responsible for your deployment to the foreign country. The employment agreement was entered into on a date for a fixed period. There have been renewals of the agreement. The duties are expected to be performed in a foreign country.

As part of the employment agreement, your employer agreed to pay for accommodation, internet, travel and meals. The employment agreement contemplates you may trigger a tax liability in a foreign country.

You initially resided in a hotel provided by your employer for several months. You now reside in long-term rental accommodation provided by your employer. A lease agreement for the accommodation was entered into and remains valid for the period of your employment.

You are paid monthly by your employer into an Australian bank account as a matter of administrative convenience for your employer.

You did not hold private health insurance in Australia. You are currently covered under health insurance provided by your employer.

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

You are not a member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

You do not own Australian property.

You have no material assets or investments in Australia. You own shares in entities.

All your household effects are held in long-term secure storage in Australia.

Personal effects have been taken with you where possible; otherwise they are in storage as mentioned above.

You currently operate accounts with an Australia bank including a credit card. You have advised them that you are a foreign resident so that non-resident withholding tax can be deducted.

You have a foreign country driving license.

You expect to return to Australia on limited occasions for short visits, primarily for private purposes. As a divorcee, you intend visiting your children semi-regularly during the year.

You have returned several times to Australia to visit your children and family for short stays totalling less than 183 days in any income year.

You have de-registered from the Australian Electoral Commission.

You were not a member of any social or sporting association prior to your departure.

You do not recall what you stated when completing incoming and outgoing passenger cards.

You do not expect to lodge any Australian income tax returns while you are overseas.

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 a resident of Australia for taxation purposes from your departure date.

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, you were residing in Australia until your departure date. You departed Australia and went to a foreign country to live and work until at least 2022.

(ii) Nationality

You are an Australian citizen.

(iii) History of residence and movements

You lived and worked in Australia prior to leaving Australia to take up your employment contract in a foreign country. Since then you have returned to Australia to visit your children and family for short stays.

(iv) Habits and 'mode of life'

Since your departure you have lived and worked in a foreign country. You intend to live and work in a foreign country until the end of 2022. At the conclusion of the event, you may remain in a foreign country or be deployed to another country or return to Australia.

You established a residence in a foreign country in rented accommodation. Initially, you resided in a hotel paid for by your employer. Now you reside in long-term rental accommodation, also provided by your employer. You have a lease agreement for this accommodation which remains valid for the period of your employment.

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

You have returned to Australia several times to visit your children and family for short stays.

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia was to live and work in a foreign country on an employment contract until 2022.

You have made short trips to Australia to visit your children and family.

(vii) Family, business and financial ties

Family

You live by yourself in a foreign country.

You are divorced and intend visiting your children in Australia several times a year.

Business or economic

You took up an employment contract in a foreign country from until at least 2022. You have no plans to return to live and work in Australia during that period and have no job being held for you in Australia.

Assets

You do not own Australian property.

You have no material assets or investments in Australia.

You own shares in entities.

All your household effects are held in long-term secure storage in Australia. Some personal effects have been taken with you otherwise they are in storage.

You have accounts with an Australian bank including a credit card. You have advised them that you are a foreign resident so that non-resident withholding tax can be deducted.

You are paid monthly into one of your Australian bank accounts as a matter of administrative convenience for your employer.

You have a foreign country driving license.

(viii) Maintenance of a place of abode

In a foreign country you lived in accommodation provided by your employer but with a lease agreement.

You have no dwelling in Australia.

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.

You moved to a foreign country to live and work until at least 2022. You have established a home there in leased accommodation. You have made several short trips to Australia. You maintained no assets in Australia apart from some personal belonging held in storage.

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' and you have not retained a continuity of association with Australia since your departure date.

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 Australia. Your domicile of origin is Australia because you were born here. As you have not taken steps to make another country your domicile, your domicile is Australia and remains unchanged while you are in a foreign country.

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 individual's presence in the overseas country, and

•       the durability of association that the individual has with a particular place in Australia.

You live in a foreign country in rented accommodation which you have established as your home. You are employed in a foreign country on a renewable contract and have no intention of returning to Australia until at least 20XX except for short visits to see your children.

Although Australia remained your domicile, the Commissioner is satisfied that you established a permanent place of abode outside of Australia from your departure date.

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, during your time in a foreign country you have travelled to Australia on several occasions for short stays. The purpose was to visit your children. You were not physically present in Australia for more than 183 days in any prior income year and will not be in any future income year.

You are not a resident of Australia under this test for the period of the ruling.

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

As you have not passed any of the tests of residency, you will not be a resident of Australia for taxation purposes for the period of the ruling.