Edited version of private advice

Authorisation Number: 1051851247969

Date of advice: 12 August 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes after departing Australia some years ago?

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 were born in Australia. You are a citizen of Australia.

You had a visa that allowed you to enter Country A.

You left Australia in late 20XX to live in Country A and became a resident for tax purposes.

You beneficially own a property in Country A.

You also beneficially own a residential property in Country B.

You relocated to Country B in to live there indefinitely.

You became a Country B tax resident. You also ceased to be a Country A tax resident.

The Country A visa expired. Instead of applying to extend the visa you applied for a Country B visa which was issued shortly after.

When your current visa expires you intend to apply for an "indefinite remain" visa. If granted, this visa will allow you to remain in Country B indefinitely.

You established a business in the Country A, but it did not flourish.

Your de facto partner will remain in the Country A for the foreseeable future work reasons but will regularly join you in Country B.

Your de facto partner is a Country A citizen.

You do not own property in Australia.

Your personal possessions are in both countries.

When your Country A business did not flourish you then established a business in Country B. This business has grown to employ over X staff.

Your Country B business has rented commercial premises locally.

For the foreseeable future, you expect to spend:

1.    At least ½ a year in Country B at your residential property,

2.    Up to 60 days in Australia,

3.    No more than 90 days in Country A, and

4.    The balance of days either in Country B or travelling elsewhere for private and business purposes.

You are employed by the business in Country B. This business is conducted through a local corporate group that is owned by a local discretionary trust set up by yourself.

You intend on returning to Australia as a visitor for periods not exceeding 60 days.

You do not intend to return to Australia to live.

You have removed your name from the Australian electoral roll.

Your parents and sibling remain in Australia.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Detailed reasoning

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 to live and work in Country A and then in Country B.

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 live and work overseas.

However, you maintained family ties with Australia and nurture these ties with regular visits. You intend on returning to Australia as a visitor for periods not exceeding XX days.

You do not intend on returning to Australia to live.

You will maintain a connection to Australia as evidenced by -

•         You will visit Australia for up to XX days per financial year.

•         Your parents and sibling remain in Australia.

Your pattern of travel demonstrates that you will live in Country B and will spend less than XX nights in your Country A property each year. You will be merely visiting when you travel to Australia. You have not maintained or redeveloped a strong presence here.

You are a non-resident for tax purposes under the resides test in the 20XX to 20YY financial years.

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 B. 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 the 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. You remain in Country B on a visa, but you intend to apply for indefinite leave to remain.

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.

This concept was further explored in Harding v Commissioner of Taxation (2019) FCAFC 29 (Harding), where Davies and Stewart JJ stated at paragraph 40 that in reference to the term 'permanent place of abode', the word 'place' should accordingly be read as only including a reference to a particular country or state.

Further, the Full Court found in Harding at paragraphs 36 and 40 that 'permanent place of abode outside Australia' involves two considerations as follows:

1) Whether a 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.

In your case you have established a permanent place of abode outside of Australia as:

•         You sold your residential property in Australia.

•         Your defacto partner accompanied you overseas and will visit you in Country B regularly.

•         You only intend to visit Australia for periods of up to XX days per year.

•         You have relatives in Australia, but your defacto partner accompanied you overseas.

You have also taken the actions below to establish a permanent place of abode outside Australia -

•         Established a thriving business in Country B which employs staff.

•         Rented considerable commercial premises locally in Country B.

•         Beneficially own a residential property in Country B.

•         Received a visa from Country B.

•         Funded a discretionary trust since moving from Country A to Country B.

This indicates that you have abandoned, in a permanent way, your Australian residence.

The duration and continuity of your presence overseas supports the argument that you have been living in there for the long-term; initially in Country A and then in Country B.

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 overseas.

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 be in Australia as a visitor for periods not exceeding 60 days per income year.

You are not a resident for tax purposes under this test.

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 since your departure.