Edited version of private advice

Authorisation Number: 1051787892327

Date of advice: 08 December 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes after departure in early 2018?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

Year ending 30 June 2021

The scheme commenced on:

1 July 2017

Relevant facts and circumstances

You are an Australian citizen who departed Australia in early 20XX, to live in Country A.

Upon departure you intended to reside there for the foreseeable future, and you had no plans to return to Australia, apart from brief family visits.

You are currently unemployed but are also a director and shareholder of a company "Company A" which is currently being closed. You receive no remuneration from this company and expect it to be closed with a year.

You initially held a tourist visa, but subsequently applied for a Business Travel visa which allowed multiple entries and exits. You currently plan to apply for a more permanent business investment visa.

You are currently on a 1-year visa which is sponsored by a local company. You will remain on this visa until the Covid-19 travel restrictions are eased, after which you will apply for a business investment visa which will allow you to live in Country A for 3 years. You will then apply to renew the visa every 3 years and for the period you wish to remain living there.

You retain an Australian bank account which is rarely used. All day-to-day living expenses are paid by your husband using a bank account in Country B. This account is in your husband's name and he retains this account as he has a rental property in Country B.

You and your spouse reside in a house which is rented on an annual basis. You are expecting the birth of your first child and anticipate that you, your spouse and the baby will live together in this rental house as a family.

Upon departure you disposed of household effects or shipped them to Country A to furnish your rental home.

You rent vehicles on an annual basis from a local company.

You retain your investment property in Australia.

Your remaining family in Australia are non-dependants. You have no children.

You have no material assets or investments in Australia apart from your investment property and shares in Company A. You plan to sell this company.

You have advised the Australian Electoral Commission of your departure.

You cancelled your Australian private health insurance policy.

You do not intend to return to Australia except for brief family visits of less than 30 days. During the period of this ruling you returned to Australia on X occasions. These visits were to visit your family.

You ceased membership of professional and social groups in Australia before departure. You have joined a local sports club and enjoy a wide circle of friends in your local area who contribute to strong local social connections in Country A.

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 you intended to reside in Country A for the foreseeable future with your spouse and you had no plans to return to Australia, apart from brief family visits.

You maintained family ties with non-dependant family in Australia. You nurtured these ties with regular visits however you have established a new abode where you now reside with your spouse.

You established social and sporting connections in Country A and have withdrawn from those in Australia - apart from your family relationships. Your living arrangements in Country A are long-term rental accommodation, furnished with your personal effects.

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

This is because you are not considered to have maintained an enduring association with Australia as you have no home in Australia which remains available to you. You have also established a family home in Country A.

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 as yet. However, you intend to apply for a long stay business visa which will allow you to remain there for 3 years and which can be renewed indefinitely.

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 established a permanent place of abode outside of Australia as:

•   You have no home in Australia which remains available to you.

•   You have set up an established home with family in Country A.

•   Although you have visited Australia since your departure to maintain family connections your main family connection lies in Country A.

You intend living in there for a considerable and indeterminable time. You have abandoned your residence in Australia and most of your connections to Australia.

The duration and continuity of your presence in Country A supports the argument that you established a permanent place of abode outside Australia. Your arrangement suggests permanent or at least long-term duration there.

You have maintained an association with Australia through family relationships, but these are not strong enough to suggest that you retain strong connections to Australia. These arrangements suggest that you have established a permanent abode in Country A.

Consequently, the Commissioner is satisfied that you have a permanent place of abode outside Australia, and 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 will not be in Australia for more than 183 days in an income year during 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.