Edited version of private advice

Authorisation Number: 1051789981518

Date of advice: 5 January 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 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 not a citizen of any other country.

You are not a permanent resident of any other country.

You left Australia in the 20XX income year.

You relocated to country Y to live and work.

You work for a company in Country Y.

You have a valid residency sponsored visa, residency card and driving license.

The visa only allows you to be in Country Y if you are employed.

Your live-in long-term rental accommodation in Country Y which is paid for by your spouse's employer.

Your spouse also lives and works in Country Y.

You are a part owner in a house in Australia which is being rented.

You made two trips back to Australia to care for relatives which exceeded 183 days in the XXXX income year.

Your spouse also returned to Australia to assist with the care of your relatives.

You initially stayed in a house owned by one of your relatives, but due to the complexity of caring for both relatives you and your spouse took a short-term rental lease on a property that was approximately halfway between both relatives to make the caring easier.

You continued to work for your overseas employer while in Australia.

At no stage did you intend on living in Australia on a permanent basis.

The purpose of your visit and stay in Australia was purely to assist with the care of relatives.

Your home is in Country Y and this is where you returned to.

You have not been in Australia for more than 183 days in the 20XX income year and you do not intend on being in Australia for more than 183 days in the 20XX income year.

You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth Government super funds.

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, 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, 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. These tests are:

1. the resides test

2.    the domicile tests

3.    the 183-day test

4.    the superannuation tests

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.

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 country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered 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.

You have been living and working in Country Y since XXXXX. Your spouse is also living and working with you in Country Y. You live in long-term rented accommodation in Country Y.

Even though you were in Australia for a significant period of time in the 2019 year, this was for compassionate purposes and you had no long-term intention to stay in Australia. You did not establish significant ties to Australia during this time.

Based on the information you have provided to us the Commissioner is satisfied that you are not residing in Australia according to ordinary concepts.

You are not a resident under this test.

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.

Your domicile is Australia as you are a citizen of Australia. You are not a citizen or permanent resident of any other country and you have not taken any steps to be a citizen or permanent resident of Country Y.

Your domicile is therefore Australia.

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 place in Australia.

You went to Country Y in XXXX. You work in Country Y. Your spouse also went to Country Y. Your spouse works in Country Y. You live in long-term rental accommodation in Country Y. You have returned to Australia to care for sick relatives.

The Commissioner is satisfied that you have a permanent place of abode outside Australia due to the above reasons.

You are not a resident under this test.

The 183-day test

Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that:

•         their usual place of abode is outside Australia

•         they have no intention to take up residence in Australia.

The term 'usual place of abode' is not the same as 'permanent place of abode'. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country.

You were in Australia for more than 183 days in the 20XX income year.

The reason for your long visits to Australia were due to the ill health of your relatives.

You had no intention on staying in Australia permanently and you were still working for your Country Y employer and still had your rental accommodation in Country Y during this period.

You have not been in Australia for more than 183 days in the 20XX income year and you do not intend on being in Australia for more than 183 days in the 20XX income year.

The Commissioner is satisfied that during the 2019 income year, your usual place of abode was outside Australia and you did not intend to take up residence in Australia.

As your usual place of abode was outside Australia in the 20XX income year and you had no intention of taking up residence in Australia, you were not be a resident of Australia under this test.

As you have not been in Australia for more than 183 days in the 20XX income year and you do not intend on being in Australia for more than 183 days in the 20XX income year you will not be a resident under this test.

The superannuation test

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

A person is a resident under this test if they are:

•         a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

•         an eligible employee for the purposes of the Superannuation Act 1976; or

•         the spouse, or a child under 16, of a person covered by either of the above.

You and your spouse are not eligible to contribute to the relevant Commonwealth super funds.

Therefore you are not a resident under this test.

Your residency status

You are not a resident of Australia for taxation purposes for the 20XX, 20XX and 20XX income years.