Edited version of private advice

Authorisation Number: 1051786953305

Date of advice: 2 December 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes after departure?

Answer

No

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 are an Australian citizen who departed Australia in late 20XX to take up employment with Company A in Country A. You are divorced and have begun a new relationship. Your new partner has since joined you in Country A.

Your children have remained in Australia to finish their studies.

Upon departure you intended to reside in Country A on a permanent basis and not to return to Australia.

Your employment is for an initial period of X years but could be extended.

You hold an "Employment Pass", which is typical for expatriates living and working in Country A. This visa was supplied by your employer. You will apply to extend this Pass after X years.

Your pay is deposited into a local bank account. To facilitate this, you have opened a local bank account with Bank A. You use this account to pay routine living expenses.

You reside in a long-term leased apartment which is renewed on a 2-year basis as is typical in Country A.

Upon departure you donated all individual and personal effects and household furniture to your relatives and in-laws, apart from some furniture which was shipped to Country A. You have partly furnished your apartment with this furniture.

You do not intend to acquire a local vehicle yet as they are expensive to obtain, local public transport is freely available, and you also use hire cars. You may review this decision after 12 months.

You do not own Australian property.

You have no material assets or investments in Australia.

You have advised your remaining Australian bank accounts of your non-resident status.

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

You have cancelled your Australian private health insurance policy.

You ceased membership of professional and social groups in Australia before departure. You intend to establish professional and social relationships in Country A over the next few years but have not yet had time to do so.

Neither you nor your partner 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 late 2020.

You have not yet returned to Australia.

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 overseas indefinitely.

You have not maintained strong family ties with Australia.

You intend to establish professional, social or sporting connections in Country A and have withdrawn from those in Australia - apart from your family relationships. Your living arrangements are rental accommodation only with personal effects and some furniture you imported from Australia.

You are not considered a resident for tax purposes under the resides test after departure. You are not considered to have maintained an enduring association with Australia. You do not have an abode in Australia which remains available to you and you have established a new home overseas.

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 Country A. You have not been granted, nor have you actively sought, permanent residency in any other country.

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 is satisfied 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 established a permanent place of abode outside of Australia as:

•         You have no home in Australia available to you.

•         You have set up an established home with your partner in Country A using your furniture and personal effects from Australia.

•         You have children in Australia; however, they are no longer dependent and have chosen to remain in Australia to continue their studies.

You intend living in Country A for a considerable and indeterminable time. You have abandoned your residence in Australia and most connections to Australia. Your family connections to Australia are not strong, being based purely on your adult children.

The duration and continuity of your presence in Country A supports the argument that you have established a permanent place of abode outside Australia. Your arrangement suggests long-term duration there, for the life of one major project, and the possibility of an extension beyond that project.

Consequently, the Commissioner is satisfied that you have a permanent place of abode outside Australia. You are therefore a non-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 do not intend to spend more than 183 days in Australia during any of the years of the ruling period.

You are not a resident for tax purposes under this test during your time in Country A.

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 a non-resident of Australia for income tax purposes after departing Australia.