Edited version of private advice

Authorisation Number: 1051788080332

Date of advice: 8 December 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes for the 20XX income year?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian citizen who initially departed Australia in late 20XX to work in Country B.

In mid-20YY you commenced work with Company A in Country A.

While there you hold a residential visa, which is renewed every 12 months. This visa is liked to your employment.

You returned to Australia in early 20XX to reduce the health threat posed by the Covid-19 pandemic. Your employer encouraged employees to return to their homes and to work remotely until the pandemic situation in Country A improves.

Your spouse is a citizen of Country C who elected to remain in Australia as their occupation required that they remain. They are employed at a local university, as well as holding a position in a research group located at the same university.

You return to Australia 1 or 2 times per year to visit your family and holiday.

Your child lives in County C and has not joined you.

You intend to return to Country A once authorised to do so. In the meantime, you continue to work remotely.

Your intention is to emigrate to Country C in X years i.e. in 20XX. You and your spouse developed a plan in 20YY to allow this to occur. You developed this plan so that you can live near your child who moved to Country C recently. Your spouse has extensive family in that country. The X-year plan was developed as your spouse needed to complete a X-year contract to establish a research group in Australia.

Your pay is deposited into an overseas bank account which is jointly owned with your spouse. You also have a joint Australian account which is used primarily by your spouse for routine banking.

You have an international health insurance policy while working overseas.

You reside in your jointly owned home in Australia. This was your residence before departing Australia.

In Country A you lease a 1-bedroom apartment with kitchen, bathroom and a separate living area. This lease expires at the end of 2020 and you intend to renew the lease. If this lease is not renewed, or cannot be renewed, your employer will assist you to source a new apartment which will probably be in the same apartment complex.

The apartment is rented as a furnished apartment with normal major furniture such as bed, fridge, couch etc. however, you have purchased some minor items local such as a TV, pots and pans and an ironing board. You also take personal possessions such as your laptop when you occupy this apartment.

As noted above, you own a share of your current residential home jointly with your spouse, have an Australian bank account and you also have and Australian superannuation account. You have a joint overseas bank account with your spouse.

In Country A you have joined the local professional society, and a company social group which provides sport and social activities for employees.

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 returned to Australia in 20XX.

This subject is addressed in Taxation Ruling 98/17 (TR 98/17) 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 pending emigration to Country C.

You have maintained strong family ties with Australia and nurtured these ties with regular visits to your spouse.

Your living arrangements in Country A is rental accommodation only. You have established a merely transient abode outside Australia.

You are considered a resident for tax purposes under the resides test after departing Australia as you maintained an enduring association with Australia. You have an abode, your family home, in Australia which remains available to you and you have established a merely transient abode outside Australia.

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 returned at the suggestion of your employer. 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 not established a permanent place of abode outside of Australia as:

•         You have a family home in Australia available to you.

•         You have set up a merely transient apartment overseas.

•         You maintain strong connections to Australia by regular visits to family.

•         You have a child in Country C, however that child is no longer dependent and has an independent life overseas.

•         You plan and intend to emigrate to Country C; hence you do not have an intention to stay in Country A permanently.

Your family connections to Australia are strong, based on your family home, your spouse and your repeated trips to maintain that family connection.

The duration and continuity of your presence in Country A supports the argument that you have established a transient place of abode outside Australia. Your arrangement suggests short-term duration there, until it is convenient to emigrate to Country C.

While we accept that rental accommodation of which you have exclusive use can be considered an abode for the purposes of this test, the surrounding information regarding your family and long-term intentions leads to a conclusion that Country A is a temporary place of abode.

Consequently, the Commissioner is not satisfied that you have a permanent place of abode outside Australia. 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 returned to Australia in early 20XX and were not in Australia for more than 183 days in the ruling year.

You are therefore not a resident for tax purposes under this test in the 20XX year.

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 are a resident of Australia for income tax purposes in the 20XX income year.