Edited version of private advice

Authorisation Number: 1051862060447

Date of advice: 14 July 2021

Ruling

Subject: Residency - am I an Australian resident

Questions and answers

Will you be a resident of Australia for the period of the ruling?

Yes.

Will you be deemed to be solely a resident of Australia under Article 4(2) of the Australia - foreign country Double Tax Agreement (DTA) for the period of the ruling?

Yes.

Answers

This ruling applies for the following periods:

Income year ended 30 June 2021

Income year ended 30 June 2022

Ruling period ending X December 2022

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You and your partner are Australian citizens who have lived in Australia for most of your lives.

You first accepted an offer of employment with the employer in a foreign country commencing in 2018. Your partner travelled and lived with you to a foreign country while you were employment with the employer.

You have accepted an extended contract of employment from the employer in a foreign country This secondment is expected to last until the end of 2022, after which the employer will give you an option to return to Australia.

Included in your role is the executive leadership of all business lines in the employer foreign regions (including Australia).

Your partner intends to travel and live with you in a foreign country while you carry out the extended employment with the employer.

Neither you nor your partner, has ever been employees of the Commonwealth Government and hence neither are members of any government superannuation scheme.

You and your partner have adult children who will remain in Australia while you are overseas. It is intended at least one of these children will occupy the family home in Australia where you and your partner will store personal effects including car, furniture, pets and personal belongings. You and your partner will also use this home as a base when returning home to Australia during the secondment.

You intend to lease a house in a foreign country to act as temporary accommodation during the secondment. You intend to maintain household furnishing to furnish this rented house but will leave the majority of your personal assets in Australia, stored at the family home.

You and your partner are members of a SMSF: The Fund) This fund has a trustee company which is incorporated in Australia - X Pty Ltd. You and your partner wish to continue to contribute to this SMSF during the secondment.

You own several investment properties in Australia which will be retained and continue to be leased while you are away from Australia. Your partner owns a property which will be leased on a long-term basis during the secondment.

You and your partner will retain Australian shares, Australian bank accounts, Medicare cards, membership of a private health fund and driver's licenses. You and your partner will also remain listed on the Electoral Roll during the secondment.

Whilst you and your partner will return to Australia during the secondment, it is anticipated that neither will be in Australia for more than 183 days in any one income year.

You and your partner will maintain a local bank account in the foreign country and will be considered to be a tax resident of the foreign country under their tax legislation.

Future planned travel has been made.

From the date when you arrived in Australia to your planned departure date of you will have been in Australia for fewer than 183 days during the income year ended 30 June 2021.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

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

Double Tax Agreement between Australia and the foreign country

Reasons for decision

Summary

You will be a resident of Australia for taxation purposes for the period of the ruling.

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, 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, 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 a taxpayer is a resident of Australia. These tests are:

1. the resides test
2. the domicile test
3. the 183-day test
4. 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

1. 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.

InDempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014)the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word:

bears its ordinary English meaning, which 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".

When considering whether someone resides in Australia the following factors are usually considered:

• physical presence
• intention or purpose
• family or business ties
• maintenance and location of assets
• social and living arrangements

You and your partner are Australian citizens who have lived in Australia for most of your lives. You first accepted an offer of employment from the employer in the US from in early 2018. This employment was expected to last two years but has been extended to until the end of 2022. Your partner will continue to travel and live with you in a foreign country while you continue your continued employment with the employer.

Whilst you and your partner have spent most of the past few years in a foreign country you have made several trips to Australia but of short duration. However, you and your partner have maintained so much of your life here in Australia, such as:

• your furnished family home;
• your children live remain in Australia;
• one of your children lives periodically in your family home;
• you have Australian bank accounts;
• you have Australian driver's licenses;
• you retain your Australian private health insurance;
• your names are still on the electoral;
• you have investment properties;
• you have a SMSF; and
• you have shares in Australian companies.

It is acknowledged that you your partner have both been in a foreign country for much longer than anticipated and you have a rented place to live in a foreign country However, apart from the secondment, yours's and your partner's lives have essentially remained as they were here in Australia and you could very easily return at any time and commence living as you were prior to the secondment.

Based on the facts of your case, the Commissioner accepts that you did not cease residing in Australia according to the ordinary meaning of the word 'reside' on your departure from Australia in 2018. Although you have established a place to live in a foreign country where you are employed, you have not established a separate home in the foreign country and your links to Australia remain more numerous and much stronger than your ties with a foreign country. In short, your only reason for being in a foreign country is employment at the end of which your employer will offer you a job in Australia and to which you will return.

You are a resident of Australia according to the resides test for the period of the ruling.

2. 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.

You are a citizen of Australia and will remain so while in a foreign country Your domicile of origin is Australia because you were born here. You have not taken steps to establish a domicile of choice. Therefore, your domicile is Australia and remains unchanged.

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.

Based on all the facts, it is considered that, on balance, your behaviour is consistent with residing in Australia and being a resident for tax purposes under the domicile test as the Commissioner is not satisfied that you intend to establish a permanent place of abode outside Australia.

You are resident of Australia for tax purposes under the domicile/permanent place of abode test of residency.

3. The 183-day test

Where a person is present in Australia for 183 days during a 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.

In your case, you will not be physically present in Australia for more than 183 days in an income year of the ruling.

You are not a resident of Australia under this test for the period of the ruling.

4. The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Commonwealth Superannuation Scheme (CSS) or the Public Service Superannuation Scheme (PSS), or that person is the spouse or child under 16 of such a person.

In your case, you are not a member of the CSS or the PSS or a spouse of such a person, or a child under 16 of such a person.

You are not a resident of Australia under this test for the period of the ruling.

Your residency status

As you have passed two of the tests of residency, you will be a resident of Australia for taxation purposes for the income years of the ruling.

Double Tax Agreement (DTA) Article X

As you are considered to be a resident of the foreign country under its domestic tax code the tie breaker test in article X of the Double Tax Agreement (DTA) will also need to be considered in order to establish your residency position in Australia.

Article X gives the tests as:

Where the person is a resident of both Contracting States, they shall be deemed to be a resident where:

in which they have their permanent home;

if the above does not apply, where they have an habitual abode, if they have a permanent home in both or in either country; or

if the first two tests do not apply, where their personal and economic relations are closer if he has an habitual abode in both countries or in neither of the countries.

In determining an persons permanent home, consider where the individual dwells with their family, and in determining where their personal and economic relations are closer, and their citizenship.

It could be argued that you will have access to a permanent home in both contracting states. Hence it will be necessary to move on to the next test of residency - habitual abode.

It is clear that you will have a habitual abode in a foreign country as you will spend majority of your time there. However, you will also maintain a family home in Australia which could also be argued could form your habitual abode. Hence it will be necessary to move on to the next test of residency - personal and economic relations.

You will maintain a number of links and associations with Australia including medical, housing, electoral, family and investment. You will also retain Australian citizenship which can be used as a test to finalise the question of personal and economic relations.

Accordingly, under this tie break test you will be considered to be solely a tax resident of Australia under article X of the double tax agreement