Edited version of private advice

Authorisation Number: 1051793152078

Date of advice: 23 December 2020

Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes from the day when you initially left Australia to commence work in County A?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are an Australian citizen and hold an Australian passport.

At the end of 2019 you entered into a contract with you employer to work for them in Country A from early 2020 until mid 2022.

You were seconded to their client.

The employment contract included provision by the employer of accommodation to a specified standard. The accommodation would change if and when your family joined you.

You departed Australia for Country A in early 2020 to commence work.

At the time you left Australia, you intended to make your home indefinitely overseas.

In your application, you explained that your plan was that your spouse and children would join you in Country A at the conclusion of the school year as your child is in the final year of schooling.

You returned to Australia in after a very short time with the intention of remaining here for another short period to finalise your affairs in Australia while continuing to work remotely. During this time your visa and residential status in Country A (Country A ID Card) were to be finalised. On your return you were to establish a home suitable for your spouse and children to join you later in the year.

Once you had the required visa, you planned to open a bank account in Country A so your salary could be paid into the Country A account rather than your Australian bank account.

You could not return to Country A at the end of the two weeks in Australia because of COVID-19 travel restrictions.

You continued to work remotely intending to return to Country A as soon as possible, perhaps the before the end of the year.

You received your single-entry work visa which allowed you to remain in Country A for 24 months. However, you have been unable to leave Australia, having been denied permission to leave. Therefore, you do not have you Country A ID Card which has prevented you opening a bank account in Country A.

Your employer is paying your salary into your Australian bank account and has been withholding taxes from the payment (and paying Country A tax).

You have been working as if you were in Country A, observing their public holidays, working to their time zone and only performing work directly related to your position in Country A.

You are living in the family home as you did before you left Australia early this year. The transfer of the family home to your spouse is in progress.

You have not cancelled your Australian Health Insurance (due to requiring it for the two planned return trips to arrange affairs in Australia) and then finding that you cannot return to Country A. Country A health insurance has been prepared, but not yet instated due to you not being able to return.

You have not moved all your personal effects to Country A. Some personal effects were left in Country A with a colleague, but the intention was to complete the move during the first and second visits back to Australia.

As part of your contract, an apartment is provided by the Company in Country A. You were relocated in January to a smaller apartment to start with and were to be accommodated in a three-bedroom apartment on return. Because of the elapsed time due to travel restrictions, the apartment rental expired. The new rental has not been established yet (as far as you are aware) until Home Affairs approve your travel request.

When allowed by both governments you will return to Country A. Your intention of staying in Country A with your family after your contract ends or moving to another near by country has not changed.

You and your spouse are not eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) and are not the spouse or child under 16 of such a person.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Domicile Act 1982

Reasons for decision

Summary

You remain a taxation resident of Australia after your initial departure from Australia as you meet at least one of the residency tests for the period in question.

Detailed reasoning.

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 an individual 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.

Only one of the tests needs to be met for an individual to be a resident of Australia for tax purposes.

The resides 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. None of the other tests need be applied if the 'resides test' is satisfied.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 5^th edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; have 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'.

The Commissioner's view on the resides test is contained in Taxation Ruling

TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17).

An individual may be considered a resident under the resides test if their behaviour while they are here is such that they exhibit a degree of continuity, routine or habit that is consistent with a person residing in Australia according to the ordinary meaning of the word 'reside'. Factors that can be taken into account when ascertaining the character of a person's behaviour include the intention or purpose of the individual's stay in Australia, presence of family in Australia, location of assets and social and living arrangements.

As a broad principle, where a person has a settled routine for six months or more (for example, the person has stayed in one place or has been with one employer for six months at the same location) they may satisfy the resides test. The period of time of the settled routine need not be confined to one financial year. As long as the pattern of behaviour is exhibited the individual may be regarded as being a resident from the time of their arrival.

Your situation was not as you had intended because of COVID-19 and Government responses.

While you had intended to visit Australia for a short time after your initial arrival in Country A to commence work and establish a place to live there, you in fact remained in Australia living in your family home and working remotely.

While you did have a place to live in Country A and had intended to live there while finding suitable accommodation for when your family joined you later in the year, that accommodation was given up as you remained in Australia.

It is clear that whatever your intentions when you initially left Australia, that apart for a very short period you have been residing in Australia according to ordinary concepts for the entire year.

We note that had you in fact been living and working in Country A as you intended and the Commissioner is of the opinion that you would have remained a resident of Australia until your family joined you in Country A.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

'Domicile' is a legal concept determined according to the Domicile Act 1982 (Domicile Act) and common law rules.

A person's domicile is usually 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. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

Specifically, section 10 of the Domicile Act states:

The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

While section 12 of the Domicile Act states:

The acquisition of a domicile of choice in place of a domicile of origin may be established by evidence that would be sufficient to establish the domicile of choice if the previous domicile had also been a domicile of choice.

The Commissioner's view on how a domicile of choice may be acquired can be found in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia, at paragraph 21:

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

The courts have provided guidance on the concept of domicile over the years. Although the recent case decided by the Full Federal Court of Australia, Harding v Commissioner of Taxation [2019] FCAFC 29 (Harding), did not have to determine the domicile of the taxpayer, the court restated some observations from earlier cases concerning evidence of an intention to change domicile:

30. ....In Terrassin v Terrassin (1968) 14 FLR 151, Selby J observed that a person alleging a change of domicile had to prove by "clear and cogent evidence that the change has taken place" (at 154-155). His Honour referred to the decision of Lord Curriehill in Donaldson v M'Clure (1857) 20 D. 307, where his Lordship said:

... it is proper to keep in view what is meant by an animus or intention to abandon one domicile for another. It 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 purchases and sales and other business transactions ... in their political or municipal status,-and in their 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.

36. ....As Lord Macnaghten observed once in Winans v Attorney-General [1904] AC 287 at 291:

Lord Chelmsford's opinion [in Udny v Udny (1869) LR 1 HL, Sc 455] was that "in a competition between a domicil of origin and an alleged subsequently acquired domicil there may be circumstances to shew that however long a residence may have continued, no intention of acquiring a domicil may have existed at any one moment during the whole of the continuance of such residence. The question in such a case is not whether there is evidence of intention to retain the domicil of origin, but whether it is proved that there was an intention to acquire another domicil."

As can be seen from the above, a stated intention to change domicile must be backed up by actual evidence of the change.

In your case, there is no evidence to show that you made any attempt to change your domicile from Australia to Country A or to any other country.

Therefore, your domicile is still 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. 'Permanent' does not mean everlasting or forever but it is to be distinguished from temporary or transitory.

In FC of T v Applegate (79 ATC 4307; (1979) 9 ATR 899), Fisher J described 'permanent place of abode' as being:

.....the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.

In 15 CTBR Case 56 (Case 56), a seafarer was found to have a permanent place of abode on a vessel that spent its time sailing the seas and moving from country to country. The court in Subrahmanyam v FC of T [2002] AATA 1298 made reference to Case 56 at 28, as follows:

Mr Gibson considered the dictionary meanings given to "abode" and "place" and formed the view that, in one of its senses, a "place of abode" was a place of habitation or home. The ship was the taxpayer's place of abode because it was the place where he slept, ate, worked and had his recreation. It was immaterial where the ship was moored. It was his permanent place of abode because he was residing on it for an indefinite time and his presence was not merely fleeting. Mr Gibson also considered that the expression "place of abode" might be given a broader interpretation and that:

"... meaning may be a 'person's home or dwelling-house or other habitation or the village, town, city, district, county, country, or other part of the world in which a person has his home or dwelling-house or other habitation or in which he habitually resides'. In the broader of these senses the taxpayer's 'abode' at the material times was his ship or on his ship, and his place of abode was the particular part of the world where the ship happened to be at any given time. Even applying that sense it could, I think, be held that the tax-payer's permanent place of abode was outside Australia." (pages 425-426)

The Full Federal Court in Harding stated at 41 that it favoured the construction of the phrase 'permanent place of abode' as used at first instance in Applegate v Commissioner of Taxation [1978] 1 NSWLR 126 at 134:

"place of abode" may mean the house in which a person lives or the country, city or town in which he is for the time being to be found. I am of the view that the latter is the meaning of the expression used in s. 6(1.) of the Act.

The Full Federal Court at 40 summarised its thoughts on 'permanent place of abode' as follows:

•         the word 'place' in the context of the phrase 'outside Australia' involves a consideration of the town or country in which a person is physically residing 'permanently';

•         so long as the taxpayer has 'definitely abandoned' his or her residence in Australia, it is not necessary for the taxpayer to be permanently located at a particular house or flat in a particular town within a foreign country or for the person to live in one particular town, suburb or village within a given country;

•         the word 'place' should accordingly be read as including a reference to a country or state;

•         moving between foreign countries is not the same as being permanently in one country; and

•         the words 'permanent place' require the identification of a country in which the taxpayer is living permanently.

Consequently, we consider that the Full Federal Court in Harding provides two key considerations in determining whether a taxpayer has their permanent place of abode outside Australia. These are:

(1)      whether the taxpayer has definitely abandoned, in a permanent way, their Australian residence, and

(2)      whether the taxpayer is living permanently in a specific country, rather than moving between foreign countries.

Your Situation

While beyond your control you were only on Country A for a very short time and have not abandoned your Australian residence or being living permanently in Country A. You have neither been living in Country A or have a place to stay there other than for a few weeks

Consequently, in using the guidance in Harding, there is no specific country outside Australia that can be identified as being your 'permanent place of abode'.

Therefore, the Commissioner is not satisfied that you have had a permanent place of abode outside.

You are a resident of Australia under the Domicile test.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here.

You were in Australia for more than 183 days in the 2020 income year.

You did not have a usual place of abode outside Australia, while you may have been in the process of establishing one - you did not.

You are a resident under the 183 days test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service 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 resident under this test.