Edited version of private advice

Authorisation Number: 1051910382507

Date of advice: 19 October 2021

Ruling

Subject: Residency for tax purposes

Question

Are you a resident of Australia for taxation purposes from when you permanently departed Australia?

Answer

No

This private ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX and onwards

The scheme commences on:

28 February 20XX

Relevant facts and circumstances

Your tax agent advised that:

You were born in XXXX on XXXX. You were a XXXX citizen and previously held a XXXX passport.

Your spouse was also born in XXXX on XXXX and is a XXXX citizen and passport holder.

You were married in XXXX in XXXX, and your two children were born in XXXX

In XXXX, you were granted Permanent Residency status in Australia and in XXXX, you were granted Australian citizenship.

Your spouse was granted Permanent Residency status in Australia in XXXX, however, due to Covid-19, she has not yet entered Australia.

You first arrived in Australia on XXXX on a student visa and studied a Master of XXX at the University of XXXX in XXXX.

You initially resided in long-term rental accommodation whilst you were living and studying in Australia.

In XXXX, you purchased a property in Australia, which you immediately established as your principal place of residence. The address of the property is: XXXX You continuously resided in this property in Australia from XXXX to XXXX. You sold this property on XXXX.

In early XXXX you decided to permanently relocate back to XXXX and permanently departed Australia to XXXX on XXXX.

On your departure from Australia in XXXX, you sold your furniture in Australia. You took some of your personal possessions to XXXX on your departure.

You moved into permanent accommodation in XXXX where you maintained all your personal belongings

You commenced full time employment with XXXX under a permanent XXXX employment contract. Your employment contract provided that your employment would be based in XXXX and would be permanent, ongoing and for an indefinite period. You expect this role to be for several years and most definitely more than 2 years.

You hold bank accounts in XXXX for daily use where you receive your salary from your employer and your day-to-day expenses.

You notified Australian banks that you were ceasing to be a tax resident and would be considered a non-resident of Australia for taxation purposes from the date of your permanent departure.

You also advised the Australian Electoral Office to update your status as an overseas voter on the Australian Electoral Roll.

You suspended your Australian health cover from when you departed Australia.

You sold your motor vehicle that you held in Australia before your departure.

You and your spouse acquired a residential property in XXXX. The residential and postal address of this property is XXXX The majority of your family and friends also reside in XXXX, where you meet regularly for dinner and social gatherings.

You state that you do not have many friends nor any family in Australia, and do not belong to a social group.

You hold XXXX bank accounts and XXXX credit cards for daily use in XXXX. You purchase financial products in XXXX banks, purchases insurance products and trade shares in XXXX security companies.

You and your family have health cover in XXXX with a XXXX health provider.

You have made short and infrequent trips to Australia since your departure. You would travel back to Australia no more than once or twice per year and would stay no more than approximately XX days per annum.

You hold a residence card in XXXX. This card allows you to reside and work permanently in XXXX.

Since your departure from Australia, you lodged individual tax returns in XXXX as a tax resident of XXXX

You no longer have any memberships or associations in Australia.

You own one investment apartment in Australia that you recently acquired and settled in XXXX.

Neither you nor your spouse is an employee of the Commonwealth Government of Australia and therefore has not been a member of the Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation Scheme

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

Question

Are you a resident of Australia for taxation purposes from when you permanently departed Australia?

Summary

Based on the facts you are not a resident for tax purposes for the year ending 30 June 20XX and thereafter as you left Australia permanently.

Detailed reasoning

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 have lived in XXXX with your spouse and children on permanent basis since your departure on 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 as your wife and children live there. You have also satisfied the following conditions:

•         you and your spouse maintain a property in XXXX where you stay together. You do not have any personal belongings in Australia, except for your rental property that you purchased in 20XX in Australia.

•         you have established an abode in XXXX where you stay with your spouse and children.

•         you have established professional and social connections in XXXX with various friends and social organisations.

•         you are considered a non-resident for tax purposes under the resides test because:

­   you do not maintain an enduring association with Australia

­   you maintain strong family ties with your spouse and children in XXXX

­   you have XXXX bank accounts

­   you purchased a car and taken out insurances in XXXX

­   you have ceased your health fund in Australia

­   you have social living arrangements with various organisations in XXXX

­   you have a residential property in XXXX where you live with your family.

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

"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 is XXXX. Your intention is to continue to work and reside on a permanent basis in XXXX with your spouse and children.

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:

•         you live in your property in XXXX with your spouse and children, and it remains available to you

•         you have XXXX bank accounts and have advised your Australian bank accounts that you are a foreign resident. You also advised that you were an overseas voter to the electoral roll in Australia

•         you purchased a car and taken out insurances in XXXX

•         you intend living in XXXX for a considerable and indeterminable period of time with your spouse and children.

The duration and continuity of your presence in Australia supports the argument that you established a long-term place of abode in XXXX. While you are still a citizen of Australia, this does not outweigh the enduring association and connection you have, and 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 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.

You have been present in XXXX for more than 183 days in 20XX tax year and thereafter, 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 as your spouse and children live there and since then have lived and worked there. You now have a XXXX residency and have no intention to return to Australia. You have built long-term social and family relationships in XXXX and removed yourself from the electoral roll in Australia as well advised the Australian banks where you held accounts that you are a foreign resident. Furthermore, you have set up new bank accounts in XXXX, bought a new house as your primary place of residence and motor vehicles. You do not wish to leave XXXX and have moved permanently there. As you left Australia in XXXX, you were still a resident for tax purposes in the 20XX tax period but, you became a non-resident of Australia for tax purposes for the 20XX tax year and thereafter as long as you are living in XXXX. This may change if you decide to return to Australia and meet the residency test for tax purposes at a future date.