Edited version of private advice

Authorisation Number: 1051895985837

Date of advice: 26 November 2021

Ruling

Subject: Residency

Question

Are you a non-resident of Australia for tax purposes from the day following your departure?

Answer

Yes. Having considered your circumstances as a whole and the residency tests, it is accepted that you are not a resident of Australia for income tax purposes. Further information on residency can be found by searching 'QC 33232' on ato.gov.au

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian citizen and always lived in Australia prior to your departure in 20XX.

You are single and you do not have any children.

Your parents and siblings reside in Australia.

Approximately five years ago you first applied for a position overseas.

You were given the opportunity to move overseas, however the Covid-19 pandemic put a halt to those plans, and the offer was rescinded.

You accepted a job offer from overseas.

You applied for and were granted an employment visa.

The employment visa is linked to your employment.

At the time you accepted the offer from overseas you were living in a share-house.

Before leaving Australia, you sold:

•         your car; and

•         all your whitegoods to your former housemate; and

•         your furniture; and.

•         Whatever you couldn't sell or give away.

You do not own any real estate in Australia.

You took some belongings with you overseas as excess luggage.

You recently departed Australia for overseas.

You travelled overseas on a one-way ticket.

You do not have a return airline ticket.

You intend to work overseas for several years.

You would like to migrate overseas permanently if possible.

You started a new contract with your employment overseas.

You are paid in USD into an overseas bank account.

You have been provided with a furnished apartment by your employer as part of the expat package.

You are allowed to stay there for the duration of the lease (1 year) before the lease needs to be renewed.

You have purchased household effects overseas, such as furniture, pots/pans, plants, computer equipment, a bike, etc.

You have opened a bank account and an investment account overseas and have shares in the overseas country you are in.

You have made a few friends since arriving overseas.

You have joined some social classes and meet up with colleagues and friends socially.

You do not have a job being held for you in Australia.

You have removed your name from the electoral roll.

You have a bank account in Australia with a small amount of money in it which you use to receive dividends and to pay any Australian tax bills.

You advised all Australian financial institutions which you have investments that you are a foreign resident so that non-resident withholding tax can be deducted.

You have a share portfolio with an Australian Broker.

You advised all Australian companies with whom you have investments that you are a foreign resident so that non-resident withholding tax can be deducted.

You cancelled your private health insurance.

You will return to Australia periodically to visit your parents, siblings, and friends.

You have not made any plans to return to Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 6-1

Income Tax Assessment Act 1997 section 995

Reasons for decision

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms resident and resident of Australia, as applied to an individual, are defined in subsection 6(1) of the ITAA 1936.

The definition offers four tests to ascertain whether each individual 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 they reside in Australia according to the ordinary meaning of the word resides.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having 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'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679).

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains " home ": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as " home ", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

•         Physical presence

•         Intention or purpose of presence

•         Family and business/employment ties

•         Maintenance and location of assets, and

•         Social and living arrangements.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

We consider that your circumstances are not consistent with residing in Australia.

This is because:

•         You accepted a job offer overseas.

•         You left Australia recently for overseas:

•         You travelled on a one-way ticket;

•         You have live at the same address overseas which has a one-year lease agreement;

•         You have not returned to Australia since leaving.

You are not a resident of Australia under the resides test.

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Domicile

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

In your case you were born in Australia and hence your domicile of origin is Australia.

It is considered that you have not yet abandoned your domicile of origin as you have only been overseas for a short period and have not met the requirements to apply for permanent residency/citizenship of that country.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

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

The courts have held that the phrase 'permanent place of abode' calls for a consideration of the town or country where a person is located. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has his or her permanent place of abode outside Australia are:

(a)  whether the taxpayer has definitely abandoned, in a permanent way, living in Australia; and

(b)  whether the taxpayer is living permanently in a specific country.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

(a)   the intended and actual length of the taxpayer's stay in the overseas country;

(b)   whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

(c)   whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

(d)   whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(e)   the duration and continuity of the taxpayer's presence in the overseas country; and

(f)    the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

The Commissioner is satisfied that your permanent place of abode is outside Australia. This takes into account that:

•         Before leaving Australia, you sold most of your belongings;

•         You don't own any real estate in Australia;

•         Your employment overseas doesn't have a defined period of employment therefore you intend to and are able to work and live overseas for several years;

•         You've opened up a bank account and purchased furniture overseas;

•         You've integrated yourself socially as best as possible overseas;

•         You've had your name removed from the electoral roll and cancelled your private health insurance in Australia; and

•         You've advised your bank and investment companies of your non-resident status of Australia.

Therefore, you are not a resident of Australia under this test.

183-day 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 exited Australia recently with the intention of working and residing overseas for an extended period of time.

Your family and friends are located in Australia and as the borders to Australia have been closed to international travellers you have not been able to visit since leaving Australia.

Given this and your establishment of a permanent place of abode outside of Australia it is considered highly likely that you will not be in Australia for the required 183 days.

Therefore, you will not been present in Australia for 183 days or more during the income year. You are not a resident under this test.

Superannuation Test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

You are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident under this test.

Conclusion

As you do not satisfy the Superannuation Test, the 183-day Test and the Resides Test, and the Commissioner is satisfied you have established a permanent place of abode outside Australia you are not a resident of Australia for income tax purposes for the year ended 30 June 20XX.