Edited version of private advice

Authorisation Number: 1051780701036

Date of advice: 24 June 2021

Ruling

Subject: Residency

Question

Were you a resident of Australia for taxation purposes for the period of the ruling?

Answer

No.

This ruling applies for the following period:

Income year ended 30 June 20XX

Income year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

General

Your country of origin is foreign country A. You are a citizen of foreign country A. You are not a citizen of any other country.

You migrated from foreign country A to Australia. You and your family first entered Australia as immigrants on different dates.

Your intention in 20XX was to reside and work here permanently. However, after residing in Australia for a few years, you felt there were fewer opportunities in operating a business in Australia and you were not satisfied with your career development. Moreover, you received a job offer from foreign country A; you believed it was a good opportunity for your career development. Therefore, you left your Australian job in early 20XX and started worked in foreign country A.

You hold a permanent residence visa. All your family members used your Visa as derivative applicants. This visa is granted based on you being a skilled worker in a specific occupation and nominated by an Australian employer, but once granted does not require you to maintain your employment with this employer or even in this occupation. On this visa you can travel to and from Australia for up to X years. After this you require a resident return visa to re-enter Australia as a permanent resident.

The reason why each family member immigrated to Australia on different dates is:

• Your children's education.
• Your spouse came to take care of both children.
• You immigrated to Australia in early 20XX because your employment in Australia started at that time.

Since early 20XX your children have continued their education in Australia. Your spouse was responsible for taking care of their daily life in addition to running your spouse's own business.

Before July 20XX you departed Australia with the intention of living and working in foreign country A.

You were in foreign country A for the period of the ruling.

You were a tax resident of foreign country A for the period of the ruling and lodged tax returns there.

You have no intention of living and working in Australia in the foreseeable future.

You are certain that your current career development is in foreign country A.

You made return visits to Australia to holiday and to spend time with your spouse and children:

Family and social connections

When you departed Australia on in 20XX, your youngest child had not been born. After another child's graduation, you and your spouse decided to travel to foreign country B with that child. Your youngest child was born during the travel in foreign country B. The child automatically acquired citizenship of foreign country B after being born there.

Your family's living arrangement following the birth of your youngest child:

• After birth (late 20XX), your youngest returned to foreign country A with their parent and another child. Your youngest child has lived in foreign country A since their returned from foreign country B and has never been to Australia or been granted any Australian Visa.
• Your spouse, after giving birth to the youngest child, also returned to foreign country A in late 20XX. She lived in foreign country A until early 20XX, when they came back to Australia to deal with business affairs then returned to foreign country A in late 20XX. Your spouse tried to return to foreign country A earlier but was delayed due to COVID travel restrictions. If there had not been COVID restrictions on travel, your spouse would have been living in foreign country A with the youngest child earlier. Your spouse has been living in foreign country A ever since and lives with your youngest child in the unit you own in foreign country A.
• One child visited foreign country A from in 20XX for a cultural event and has been living in Australia since returning.
• Another child returned to foreign country A with your spouse and youngest child and in 20XX came back to Australia and has been living in Australia since returning.

You and your spouse hope your youngest child can be educated in Australia. However, this is only an intention and you have not made the decision yet.

You did not provide financial support for your spouse while they were in Australia. Your spouse has been able to support themself through salary and rental income. Your spouse owns properties, one of which, is lived in with some of your children and where you stayed when visiting Australia. Your elder children still live in this property. The rental property remains rented.

You have never had club memberships or social connections in Australia. Most of your friends live in foreign country A.

When you immigrated to Australia your club memberships and social connections in foreign country A was your appointment as an official of business related association in foreign country A. This was in 20XX. You have been in this position since the 19XXs.

Employment

You were employed in Australia as director of a company x Pty Ltd from 20XX to 20XX. You had no job in Australia after that employment ceased in 20XX.

During the period of the ruling, you were employed by another company in foreign country A. You were also appointed as an official of the company in 20XX. You spent most of your time in foreign country A. You also spent time in another part of foreign country A as your employer has a branch there. Your employment in foreign country A is an on-going position.

Accommodation

While in Australia, you lived with your spouse and children; a property your spouse owns. Your spouse purchased this property with money saved in foreign country A before immigrating to Australia.

In foreign country A you lived in rented accommodation.

In foreign country A you also reside in a property that you purchased in 20XX. You lived in this flat prior to immigrating to Australia.

Assets

You owned a car when living in Australia; but you no longer own the car. Also, you had an Australian driver's license which expired in 20XX. You have a current foreign country A driver's license.

You have bank accounts in Australia:

You have owned the flat in foreign country A since 20XX. It was purchased with savings you held in foreign country A. During the period of living in Australia, the property was vacant. You sometimes returned to the property on holiday after you started work in foreign country A. You own no other property.

You did not contribute to any superannuation fund in Australia after 20XX as you were not employed by an Australian employer.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1936 section 6-5

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

International Tax Agreements Act 1953 section 4

International Tax Agreements Act 1953 section 5

Reasons for decision

Summary

You were not a resident of Australia for taxation purposes for the period of the ruling.

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.

In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014)the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word:

bears its ordinary English meaning, which 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".

When considering whether someone resides in Australia the following factors are usually considered:

• physical presence
• intention or purpose
• family or business ties
• maintenance and location of assets
• social and living arrangements

In your case, during the period of the ruling you spent time in both foreign country A and Australian:

• In foreign country A:

-        You lived and worked there from when you departed Australia.

-        You were a tax resident of foreign country A for the period of the ruling and lodged tax returns there.

-        You were in foreign country A for the period of the ruling and visited your family in Australia for a total of X days in the 20XX tax year and X days in the 20XX tax year.

-        Your intended length of stay there is indefinite.

-        You are certain that your current career development is in foreign country A.

-        You were and remain employed by a company located there.

-        You lived in rented accommodation.

-        You own a unit in where your spouse and youngest child would reside from 20XX.

-        You have social and business ties in foreign country A.

• In Australia:

-        You had no job in Australia after early 20XX

-        You have no intention of living and working in Australia in the foreseeable future.

-        Your spouse remained in Australia to support your children during their education.

-        You provided no financial support for your spouse who had rental income and business income.

-        You made short trips to Australia to be with your family as well as to holiday. You stayed in your spouse's house part of the time.

-        You own no assets in Australia.

-        You have never had club memberships or social connections in Australia.

-        When you departed Australia on early 20XX, your youngest child had not been born:

•        You, your spouse and a child travelled to the foreign country B in 20XX.

•        Your spouse gave birth to your youngest child while travelling in the foreign country B in 20XX.

•        The youngest child acquired foreign country B citizenship after being born there.

•        Your spouse and youngest child then returned to foreign country A in late 20XX and lived in the unit you own.

•        Your youngest child has lived in foreign country A since departing foreign country B and has never been to Australia and has not been granted an Australian visa.

-        Your spouse lived in foreign country A from late 20XX to early 20XX. In early 20XX, your spouse returned to Australia to deal with business affairs. Your spouse tried to return to foreign country A earlier but was delayed due to COVID travel restrictions. If there had not been COVID restrictions on travel, your spouse would have been living in foreign country A with your youngest child. Your spouse returned to foreign country A and has been living there ever since with your youngest child in the unit you own in foreign country A.

-        Your elder children have made visits to foreign country A but returned to Australia.

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' on your departure from Australia in early 20XX. Although your spouse and elder children remained in Australia in a house owned by your spouse and to which you returned for periodic visits, you established a separate home in foreign country A, where you were employed. You did not provide your spouse with financial support. You have a child who has never been to Australia.

You were not a resident of Australia according to the resides test for the period of the ruling.

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 country A and you have not taken steps to obtain Australian citizenship. Your domicile of origin is country A because you were born there. Although you have the right to reside permanently in Australia, you have not conclusively demonstrated that you have made Australia your domicile of choice.

Therefore, your domicile is country A and remains unchanged.

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 an income year of the ruling.

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 for the period of the ruling.

Your residency status

As you have not passed any of the tests of residency, you were not a resident of Australia for taxation purposes for the income years of the ruling.