Edited version of private advice

Authorisation Number: 1051905245560

Date of advice: 30 September 2021

Ruling

Subject: Residency

Question

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

Answer

No

This ruling applies for the following period:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

23 April 20XX

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You departed Australia to permanently migrate to Country A to live with your de-facto spouse.

You intend to reside in Country A indefinitely and do not plan to return to Australia to live for the foreseeable future.

You have not returned back to Australia since the date of your departure. You do not plan to visit Australia in the 20XX-XX income year unless extenuating circumstances arise.

You have a resident visa in Country A which allows you to live in Country A indefinitely.

On your outbound passenger card, you stated the reason for departing Australia was 'Permanent relocation to Country A'.

You intend to lodge income tax returns in Country A.

You have purchased a main residence in Country A.

You have acquired a motor vehicle, household effects, bank account and a driver's licence since your arrival in Country A.

You have started to join social clubs and developed social connections with friends & associates in Country A.

You plan to purchase a mooring and build a boat in Country A.

Your mail has been re-directed to Country A's address.

You have a main residence in Australia.

Your Australia main residence is currently occupied by your child on a domestic arrangement. Your child lives at the property rent free on the condition it is kept in good order.

Your Australian main residence is used as security for loans for other entities and has a caveat listed as security over a binding financial agreement.

Your key personal effects were re-located to Country A and some of your household effects have been left at your Australian main residence with your child.

Your motor vehicles were left in Australia for your children to use.

You have some investments in Australian companies and an Australian trustee company that holds significant local assets.

You have severed your ties with your social clubs in Australia.

All your children are independent adults and will remain in Australian for the foreseeable future.

You have cancelled your private health insurance policy prior to departing Australia.

You will inform Medicare of your departure from Australia when your residency status has been confirmed.

You have written to the Australian Electoral Commission to have your name removed from the roll.

You are not employed in Country A. You are self-funded through your assets and are a beneficiary to a discretionary trust.

You have advised your financial institutions of your departure to Country A. Your address and tax status has been updated.

You are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

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. 3^rd 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 have been physically absent from Australia since the date of your departure and do not plan to visit Australia in the 20XX-XX income year.

•         Your intention is to migrate and settle in Country A indefinitely and you do not intend to live in Australia for the foreseeable future.

•         You re-located to live with your de-facto spouse on a permanent basis and both reside in a home you have purchased in Country A. Mail has been re-directed to your address in Country A.

•         You have abandoned your Australian main residence and some personal effects by entering a domestic arrangement with your independent child to reside there rent-free.

•         You have severed your social connections with Australia.

•         You have established new social connections in Country A.

•         You have taken steps to sever your ties with Australia including cancelling private health insurance, taking your name off the electoral roll, and advising financial institutions of your tax status.

•         You have taken steps to establish ties with Country A including opening a bank account, purchasing personal assets, obtaining a driver's licence, and organising your tax affairs.

You are not a resident of Australia under the resides test from the date of your departure.

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 your domicile of origin is Australia.

It is considered that you did abandon your domicile of origin in Australia and acquired a domicile of choice in Country A. You obtained an resident visa in Country A which allows you to live there permanently, and you intend to live there indefinitely.

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 have been in Australia for 183 days or more in the 2021 income year. We now need to consider whether we are satisfied that, during the 2021 income year, your usual place of abode was outside Australia, and your intention was to take up residence in Australia.

In the context of the 183- day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. A person can have only one usual place of abode under the 183- day test. However, it is also possible that a person does not have a usual place of abode. This is the person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, it is necessary to examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode (Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836).

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts.

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia after your date of departure and that you did not intend to reside in Australia.

In respect of the usual place of abode this takes into account that:

•         You have physically resided in Country A since your departure and do not intend to visit Australia in the 20XX-XX income year.

•         You have established a main residence in Country A that is fully furbished, and your mail is directed to this address.

•         You still retain your main residence and some personal effects in Australia, however by entering a domestic arrangement with your child to reside there, you have abandoned your home.

•         You have established a significant presence in Country A through purchasing new personal assets, obtaining a driver's licence, organising your financial & tax affairs, and establishing new social connections.

•         You have limited durability and continuity in Australia as you have taken steps to sever ties with Australia.

•         Your independent children will continue to reside in Australia while you re-locate to reside with your de-facto spouse indefinitely.

In respect of the intention to take up usual place of abode this considers that:

•         Your Australian resident visa allows you to live in Country A indefinitely.

•         Your intention for moving to Country A is to live with your de-facto spouse on a permanent basis.

•         You have no intention of returning back to your Australian main residence to live.

You will not been present in Australia for 183 days or more during the 20XX income year.

Therefore, 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 any of the four tests of residency, you are not a resident of Australia for income tax purposes from your date of departure from Australia to year ended 30 June 20XX.