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Edited version of private advice
Authorisation Number: 1051908247055
Date of advice: 11 November 2021
Ruling
Subject: Residency for tax purposes
Question
Are you a non-resident of Australia for tax purposes under section 6(1) Income Tax Assessment Act 1936 when you relocated from Australia to XXXX?
Answer
Yes
This ruling applies for the following periods:
Year ended XXXX
Year ended XXXX
Year ended XXXX
The scheme commences on:
01 XXXX
Relevant facts and circumstances
Your tax agent advised that:
• You are a dual XXXX and Australian citizen.
• You have taken up a new role with XXXX a XXXX registered company in XXXX.
• The role is a full-time contract, and the employment contract is for three to five years.
• You were not previously employed by XXXX.
• You have departed Australia in XXXX take up your role in XXXX.
• Your salary will be administered in local XXXX currency.
• You previously resided in the XXXX from XXXX to XXXX.
• Since XXXX you have been residing in Australia until your departure in XXXX.
• You will obtain a XXXX for your new role and only intend to travel back to Australia for the purposes of seeing family and friends. You do not intend for any one stay to exceed the 30 days of leave that you are entitled to each year.
• You will be based in XXXX and will not be required to travel to Australia for work, unless for specialist conferences that may be held.
• You have a XXXX (dual citizenship) spouse who will reside with you in XXXX.
• Your spouse is expected to return two to three times a year to visit family and friends. This will be less than 60 days per year.
• You have adult non-dependent children who will not relocate with you and your spouse to XXXX.
• You will seek suitable long-term accommodation. This is expected to be in the form of:
o A long-term rental that you will select in an off-campus location. This will be assisted by XXXX through a housing allowance component of your remuneration package; or
o As a result of your seniority, executive on campus housing for the entire duration of the 5 year assignment for you and your spouse to reside.
• You have a main residence in Australia which is jointly owned with your spouse. After your departure, the house will be occupied by your child and their partner, who will be treating it as their primary residence. The house will also be used by you and your spouse as accommodation when you return to Australia for brief periods to visit family and friends.
• You have an Australian investment property which is being rented out on a permanent basis.
• You have a bank account in XXXX.
• You will cease making superannuation contributions in Australia.
• You will transport all major personal assets to XXXX at your departure.
• You have no other financial assets or interests located within Australia.
• You have health insurance as part of your employment in XXXX.
• You are registered with the following bodies:
o XXXX
o XXXX
• You intend to continue to maintain these registrations for the duration of your contract given its international recognition.
• You will obtain a driving licence in XXXX.
Relevant legislative provisions
Income Tax Assessment Act 1936, ss6(1)
Income Tax Assessment Act 1936, s6-5
Income Tax Assessment Act 1997, s995-1
Income Tax Assessment Act 1997, s768-910
International Tax Agreements Act 1953
Reasons for decision
Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).
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
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.
In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.
The question of whether an individual 'resides' in a country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered the following factors as being relevant:
• physical presence
• intention or purpose
• family or business ties
• maintenance and location of assets
• social and living arrangements.
In your case, you are still a citizen of Australia, but you were issued a residency status in XXXX after your departure from Australia. You live in XXXX with your spouse on permanent basis since your departure in XXXX.
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 is to remain on a permanent basis in XXXX with your spouse. You have also satisfied the following conditions:
(a) You have moved to XXXX in XXXX to commence a three to five year contract. This ongoing employment is your primary and reliant source of income
(b) you and your spouse will reside in a permanent house supplied by your employer. You do not have any personal belongings in Australia, except for your main residence property that that now be used by your child and their partner as a principal place of residence.
(c) you have established an abode in XXXX where you stay with your spouse.
(d) you have established professional and social connections in XXXX with various friends and social organisations.
(e) you are considered a non-resident for tax purposes under the resides test because:
o you do not maintain an enduring association with Australia
o you maintain strong family ties with your spouse in XXXX
o you have XXXX bank accounts
o you have updated your electoral roll with new address in XXXX
o you have habitual, social and economic associations with XXXX
o you have relocated all major personal affects and assets to XXXX.
Your circumstances taken together lead to a conclusion that you are a non-resident under this test for the 20XX tax year and thereafter. This may change if you decide to return to Australia and meet the residency test for tax purposes.
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" 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.
Under this test, a person whose domicile is in Australia is deemed to be a resident of Australia unless the Commissioner is satisfied that the person's permanent place of abode is outside of Australia.
A person acquires at birth a domicile of origin and retains this domicile of origin unless and until he or she acquires a domicile of choice in another country. In order to show that a new domicile of choice in another country has been adopted, the individual must be able to prove an intention to make his or her home indefinitely in that country.
In the recent case of Harding v Commissioner of Taxation [2019] FCAFC 29 ("Harding"), the Full Federal Court concluded that the relevant consideration was whether Mr Harding had abandoned his residence in Australia, although his first apartment was only 'temporary' while he waited for his family to join him.
Your domicile of origin is Australia, but your intention is to continue to work and reside on a permanent basis in XXXX with your spouse.
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 it is considered that you have established a permanent place of abode in XXXX as:
(a) you live in a property in XXXX with your spouse, and it remains available to you
(b) you have XXXX bank accounts. You updated your new address with Electoral Commission that you have moved to XXXX
(c) you have moved all your affects and belongings to XXXX
(d) you intend living in XXXX for a considerable period of time with your spouse, with a minimum period of 3 years. You believe your work contract may be extended to 5 years and may continue to remain there after the contract.
The duration and continuity of your presence in XXXX supports your argument that you will establish a long-term place of abode in XXXX. While you are a citizen of Australia, this does not outweigh the enduring association and connection you have and will maintain in XXXX.
Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly when you are physically in a country.
Your place of abode does not have to be fixed but must have the attributes of a place of residence or a place to live. Since XXXX, your usual place of abode is XXXX.
Therefore, while you are a citizen of Australia, the Commissioner considers you have established a permanent place of abode outside Australia for tax purposes in XXXX since XXXX and the 20XX tax year.
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.
For the 20XX tax year you will be present in XXXX for more than 183 days therefore, you are a non-resident for tax purposes under this test for the year.
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.
Therefore, you are not a resident for tax purposes under this test.
Application to your circumstances
You moved to XXXX with your spouse and since then have lived and worked there. You now have a XXXX residency and have no intention to return to Australia. You have now built long-term social and family relationships in XXXX and updated yourself on the electoral roll in Australia. Furthermore, you have set up new bank accounts in XXXX and have a permanent accommodation as your primary place of residence there. As you left Australia XXXX, you will not be a resident for tax purposes for the 20XX tax period and thereafter as long as you are live in XXXX. This may change if you decide to return to Australia and meet the residency test for tax purposes at a future date.