Edited version of private advice

Authorisation Number: 1051884159147

Date of advice: 11 August 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes after departing Australia in early 2015?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commenced on:

1 July 2013

Relevant facts and circumstances

You are a citizen of both Country Z, where you were born, and Australia. In early 2015 you and your family moved to Country A to accept a position with Company A.

You worked for this company for several years before resigning and taking another position with its local affiliate company. You worked in this new position for several more years.

During this time, you held a local work visa.

Some years later you moved to Country B without your family to accept another position with another local affiliate company. Again, you held a work visa which allowed you to live in that country.

Upon your initial departure from Australia, you intended to reside overseas on an indefinite basis.

Your pay was deposited into local bank accounts. To facilitate this, you opened a local bank account in both countries.

You lived with your family in a long-term leased house in Country A. This property was leased in your name although you employer paid the rent directly to your landlord.

You took all personal possessions with you although you sold your furniture before departure and bought new furniture on arrival in Country A.

Your children attended overseas schools until recently when they returned to Australia to continue their schooling. It has been your intention that they would join you in Country B during school holidays however, Covid travel restrictions prevented this from occurring.

When your family returned to Australia, they leased a residential property on normal commercial terms. When you decided to return to Australia you joined them and now live in this property.

You owned several rental properties and a family home in Australia before departure. You retained the family home, which was rented until sold, together with your rental properties. At times when the family home was not rented your family occupied this property.

You have since sold all but one of these properties. The remaining rental property in in a remote area and you intend to hold this property for the moment until property values improve.

You have no material assets or investments in Australia as you sold your vehicle before departure However, you retain an Australian superannuation fund to which you make modest monthly contributions in order to maintain your life insurance within the policy.

You retain one rental property in Australia.

You arranged for mail to be delivered to you at your various overseas addresses.

During the period of this ruling you returned to Australia on several occasions.

Your trips back to Australia were predominantly related to medical matters.

You have established professional and social relationships overseas.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

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 early 20XX.

During your time overseas you travelled to Australia on XX separate occasions in Y income years; mainly for medical appointments.

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 your initial departure was to work overseas on a permanent and indefinite basis.

You did not maintain strong family ties with Australia, returning mainly for medical appointments.

Your family relocated with you. You relocated all personal belongings to Country A when you departed.

You established an abode in Country A where you stay in rented accommodation. You furnished this rented accommodation with furniture purchased locally.

You established professional, social or sporting connections there.

You are not a resident for tax purposes under the resides test after departure because -

•         You did not maintain an enduring association with Australia via an abode in Australia.

•         You did not maintain strong family ties with Australia as your family accompanied you overseas.

•         You continue to own a residential property in Australia, jointly with your wife, but this was leased until sold.

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.

Your domicile of origin was Country Z however you changed to a domicile of choice in Australia when you applied for and obtained Australian citizenship.

You are a citizen of Australia. You have left Australia and have chosen to live and work overseas for a period of time. 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 any of countries you were living and working in as you did not have the right to reside permanently in any of those countries. This is because you did not actively apply for, nor been issued, a visa that will allow you to remain there indefinitely.

Therefore, you will be a resident of Australia under this test unless the Commissioner is satisfied that 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.

In your case the Commissioner is satisfied that you established a permanent place of abode outside of Australia in Country A as:

•         You did not leave a residential home in Australia which remains available to you. This property was rented until sold.

•         You established a home with family in Country A where you your wife and your children resided.

•         You visited Australia several times since your departure, but mainly for medical appointments.

•         Your family accompanied you overseas.

•         You established social and sporting connections overseas.

You intended living in Country A for a considerable and indeterminable time. Your Australian residence was not available to you, as it was initially rented and has now been sold.

The duration and continuity of your presence in Country A supports the argument that you established a long-term place of abode outside Australia with your family. Your intended duration there indicates permanency.

You have not maintained a strong association with Australia.

These suggest that you have established a long-term abode in Country A while not maintaining enduring associations and connections with Australia.

Similarly, the Commissioner is satisfied that you established a permanent place of abode outside of Australia in Country B as:

•         You established a home there where you resided. Your wife and children returned to Australia but had plans to visit you and live in the rented home during school holidays.

•         You visited Australia several times since your departure, but mainly for medical appointments.

•         You established social and sporting connections overseas.

You intended living in Country B for a considerable and indeterminable time. Your family had leased a residential property in Australia which was then available for your occupation.

The duration and continuity of your presence in Country B supports the argument that you established a long-term place of abode outside Australia. Your intended duration there indicates permanency.

You did not maintain a strong association with Australia while living in Country B although your wife and children returned to Australia to continue their education. Despite this, you planned for them to live with you in Country B during school holidays.

These suggest that you have established a long-term abode in Country B while not recreating enduring associations and connections with Australia when you family returned to Australia.

It is also acknowledged that the Covid pandemic interrupted your plans to remain living and working overseas and that you decided to return to Australia, mainly for medical reasons, recently.

Consequently, the Commissioner is satisfied that you established a permanent place of abode outside Australia, and you are therefore a non-resident under the domicile test of residency during the period you were living in both Country A and Country B.

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 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 in the period from departure in 2015 until your return to Australia recently.