Edited version of private advice

Authorisation Number: 1051863471500

Date of advice: 9 July 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes in the period from 1 July 2020 until XX Month 2020, in the period before you gave up your rental accommodation overseas?

Answer

No

Question

Are you a resident of Australia for taxation purposes in the period from XX Month 2020 until 30 June 2021, after you gave up your rental accommodation overseas?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 2021

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

You are a citizen of Australia who departed to live and work overseas in 199X. In the last five years you have lived in various locations, as detailed below -

2018 - 2020 Country A

2015 - 2018 Country B

2014 - 2015 Country C

2011 - 2014 Country A

You are legally separated and have no dependent children.

You maintained a residence in both Country A and Country B. In Country A. It was company accommodation and in Country B it was a rented apartment with an annual lease arrangement. Your Country A accommodation was company provided and fully furnished. You did not store personal effects in this accommodation.

Due to the civil unrest in Country A, your employer chose to establish a regional office in Country B to manage the business from abroad. As the Regional Manager, you took out a residency permit and a work permit and rented an apartment in Country B to operate the regional headquarters.

As the security situation in Country A improved your employer gradually transferred staff back to Country A. However, the security situation there was still uncertain, so the company opted to retain the Regional Headquarters in case it became necessary to evacuate Country A at short notice.

You made periodic visits to Country B in your role as Regional Manager. For this reason, you also retained the apartment lease in Country B. As the Country B office was a convenient and safe office to hold meetings with international suppliers, customers and consultants it continued to operate until mid 20XX.

You estimate that your time was spent in -

2016 to 2017 Lived and worked full-time in Country B

2018 Approximately 50% in Country A and 50% in Country B

2019 Approximately 85% in Country A

In Country A you held a residence and work permit, plus a multi entry/exit visit pass. This work permit was renewable annually. The main condition for this work permit was that you were employed by a local company.

Previously, this country had issued multiyear visas but stopped issuing such visas due to the civil unrest in that country.

While living in Country A you were provided with worldwide health insurance by your employer through Company A. This provided worldwide cover. You also maintained your right to coverage by an Australian private health fund by suspending your coverage, re-activating coverage before again suspending coverage. By this mechanism you maintained your right to coverage by your Australian health fund.

Upon departure from Country A in early 20XX, you travelled to Country B and stayed for a few days at your apartment. You then departed for Australia arriving in Australia a few days later. You were returning to Australia for a home visit.

When you arrived in Australia you found that you were unable to return overseas due to pandemic travel restrictions. You plan to return overseas to work once you have received both Covid vaccine injections.

When you returned to Australia in early 20XX you occupied an investment property you had purchased in Australia. The property was vacant, and you had intended to furnish it, find a tenant and depart Australia. However, you were unable to depart Australia, so you still occupy the apartment.

You were employed in Country A as by a local company. This employment ended in early 20YY.

You own investment properties in Australia.

When you arrived, you stayed in one of your investment properties.

You retain some Australian bank accounts, a share trading account in Australia (which includes an Australian cash account via a local Australian bank) and investment properties.

When your apartment lease ended in mid 20XX you arranged for friends to ship your personal effects back to Australia.

You advised the Australian Electoral Commission that you would be living overseas in approximately 19XX and have not been enrolled to vote since that time.

Your intention is to work overseas until you retire permanently, at which time you wish to return to Australia to live.

You occasionally access the Australian Medicare system when in Australia. Your Medibank card is still operational and allows bulk billed appointments.

You have not maintained social connection sin Australia and have no social connections in Country A or in Country B.

You have never been employed by the Australian Commonwealth government and did not belong to any Commonwealth superannuation scheme such as CSS or PSS.

You have a new work assignment available in Country B once you can travel again. You plan to stay at a local hotel before renting a local apartment. You are required to commence work before a set date under your employment contract in Country B.

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 departed Australia in 19XX to take up employment overseas.

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 until retirement when you planned to return to Australia.

In the last five years you have lived in various locations, as detailed below -

2018 - 2020 Country A

2015 - 2018 Country B

2014 - 2015 Country C

2011 - 2014 Country A

You are legally separated and have no dependent children.

You have established what could be described as a long-term presence overseas where you stay in a company owned accommodation in Country A and your own apartment in Country B.

Your accommodation in Country A was entirely work-based. The accommodation was provided by your employer and you lived there to facilitate working in that country. You did not intend to live there for the long-term nor did you establish connections to the local community apart from those necessary to work there.

Your accommodation in Country B was also a necessity imposed by your employment there and the civil unrest in that country. It was necessary to establish a convenient and safe regional headquarters where you could operate the company during the civil unrest, and you decided to do so in Country B where you leased an apartment.

Your apartment in Country B was a back-up office and a safe house in case of the need to evacuate Country A on short notice. As such, you had limited social and other connections in Country B. When you returned to Australia and the apartment lease expired, you had your personal effects shipped to Australia and relinquished this apartment as it had no further use.

Given your limited connections to Australia and residency overseas in both countries, you are a non-resident for tax purposes under the resides test in the period until you gave up the lease on an apartment in Country B.

After relinquishing the overseas apartment, you are a resident under this test, as you had returned to Australia and had no other residency. You did not have strong ties remaining overseas and you have made your home in Australia from that point in time.

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 overseas. You have not been granted, nor have you actively sought, permanent residency in any other country.

You stayed in Country A on a renewable short-term work visa which was arranged and renewed by your employer.

You stayed in Country B by applying for both residency and work permits which were granted as you were the Regional Manager of a non-operating regional office that was tax-exempt in Country B.

You have not abandoned your domicile in Australia and acquired a domicile of choice in Country A or Country B as you do not yet have the right to reside permanently in either 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 remained overseas on renewable resident visas.

Therefore, you will be a resident of Australia under this test unless the Commissioner considers 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:

n You did not remain the owner of an Australian residential property, apart from investment properties.

n Your family did not accompany you to live overseas however, you are legally separated and have no dependent children.

n You only visited Australia while working overseas but returned here on a linger-term stay because of Covid related travel restrictions.

n Your presence overseas was designed to allow you to continue your long-term employment ambition to work overseas until you retired.

n You established a long-term accommodation in Country A until civil unrest made it necessary to establish a regional office elsewhere.

n You established a long-term accommodation in Country B as a regional headquarters where you took out both residency and work visa.

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

Consequently, the Commissioner is satisfied that you had a permanent place of abode outside Australia, and you therefore remain a non-resident under the domicile test of residency during the period until you gave up your leased apartment in Country B and subsequently returned your personal effects to Australia.

After relinquishing the apartment, you no longer had a permanent place of abode overseas. Whilst you were there long term, your Country A accommodation was entirely work based and was dependent on your working there. It could not be considered a permanent place of abode.

From the date you relinquished your Country B apartment, the Commissioner is not satisfied that you had a permanent place of abode 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 have been in Australia for 365 days in the 2021 financial year. However, your usual place of abode has been overseas until recently when your intention to live overseas was interrupted by Covid related travel restrictions.

However, from the date that you relinquished your Country B apartment, your usual place of abode would have become Australia. You have effectively moved your life here for the time being and can no longer consider to be visiting Australia. You have no substantial abode overseas except your Country A accommodation which was entirely work based. You have stayed in Australia for the rest of the income year post this point and do not have strong connections overseas.

Based on the other tests that found you were a resident from that date, the Commissioner cannot be satisfied that you did not intend to take up residence in Australia.

For the period before you relinquished your overseas apartment, you are not a resident for tax purposes under this test as the Commissioner is satisfied your usual place of abode is outside Australia and you do not intend to take up residence in Australia. However, from the date you relinquished the overseas apartment, the Commissioner is not satisfied you have a usual place of abode is outside Australia and you do not intend to take up residence in Australia.

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 three 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 after you relinquished the lease on your Country B apartment.

Before this date you remained a non-resident for income tax purposes as you satisfy none of the residency tests outlined in subsection 6(1) of the ITAA 1936.