Edited version of private advice

Authorisation Number: 1051910433123

Date of advice: 28 October 2021

Ruling

Subject: International - residency

Question

Are you viewed as being a resident of Australia for taxation purposes during the ruling period under subsection 6(1) of the Income Tax Assessment Act 1936?

Answer

No.

This ruling applies for the following periods:

Income year ended 30 June 20XX

Income year ending 30 June 20XX

Income year ending 30 June 20XX

The scheme commences on:

1 July 20XX.

Relevant facts and circumstances

Background

You were born in Country A and after a significant period of time commenced living in Australia.

You became a permanent resident of Australia several years after you arrived in Australia, and an Australian citizen after several more years.

You renounced your Country A citizenship when you became an Australian citizen.

You accepted an offer of employment and entered into an employment contract with an organisation (Organisation Z) located in Country X for a period of several years.

Organisation Z facilitated your residency application and you departed Australia to commence your employment in Country X.

You did not advise the Australian Electoral Commission or Medicare that you were departing Australia but had asked your spouse (Person A) to advise them. You have not undertaken any activities in relation to any Australian elections since departing Australia, nor have you used Medicare.

You and Person A had suspended your private health insurance when you had departed Australia but had been advised by an insurance representative that cancelling the policy was not advisable as there were potential taxation implications for Person A. Therefore, the private health insurance policy had been reinstated within the cooling off period.

You had advised your tax agent of your residency status in addition to informing your superannuation fund of your residency status so that non-resident withholding tax could be deducted, if applicable.

With Organisation Z's assistance, you leased a three-bedroom apartment for you and your family.

Your accommodation in Country X (the Property) is in a private residential colony managed by a private real estate agent. Organisation Z facilitated securing the rental property and finalising the rental agreement, which is standard procedure, and in accordance with your employment policy. The rental costs are part of your pay package with Organisation Z paying rent directly to the real estate agency. You are not allowed to buy or rent any alternate/other accommodation in Country X.

The Property is leased under your name and you sign the contract. You are responsible for any utility, maintenance, and damage charges, and to ensure all payments arising in relation to the property are met within a timely manner.

Person A initiated enquiries with Australian real estate agents and shipping agencies in relation to the relocation process.

Several months after you had departed Australia Person A and your child, Person B who was a minor, joined you, and their Country X residency paperwork was finalised during the same month.

You and Person A began considering the schooling needs for Person B. You and your family visited the top schools located in Country X and determined that they could not meet the educational need of Person B.

Early the following year you determined that Person B's educational needs would be better met in Australia and they were enrolled in a school located in Australia.

Later that month Persons A and B returned to Australia to resume living in your residential property located in Australia so that Person A could continue their education in Australia.

It is anticipated that Persons A and B will travel to Country X during school term breaks, a minimum of twice per year where possible.

You will continue to reside in Country X for the duration of your employment contract and anticipate visiting your family in Australia around once every two years.

Ruling period

You and your family had initially planned for them to join you in Country X during terms breaks when possible. However, due to the COVID-19 travel restrictions Persons A and B were not able to visit you in Country X during the school term breaks as planned.

You came to Australia at the beginning of the first income year of the ruling period visit your family and to participate in discussions in relation to the sale of one of your investment properties. You had to quarantine in a hotel for 14 days and arrived at your family home after the quarantine period.

You indicated that Country X was your country of residence on your incoming and outgoing passenger cards.

You departed Australia after being in Australia for a period of around 30 days, returning to the Property in Country X in which you have continued to stay since you originally arrived in Country X.

Persons A and B travelled to Country X, staying there for around two months before returning to Australia so that Person A could return to school.

You have a renewable three-year residency visa in Country X, which is sponsored by your employer, with your current visa valid until the final income year in the ruling period.

You plan to extent your visa closer to the expiry date as you have secured employment beyond the period covered by your original employment agreement based on the approval of grants associated with your employment that have been approved until after the ruling period. You are applying for additional grants and if successful you intend extending your visa to accommodate the grant periods.

Your initial employment contract was for a specified number of years, with the current expiration date just after the end of the ruling period, but it can be extended by mutual agreement.

You anticipate continuing your employment with Organisation Z for an indefinite period of time, with Persons A and B joining you in Country X.

You have not decided if you intend applying for citizenship and/or permanent residency in Country X as that will depend on future circumstances in relation to your family.

You have/had ownership interests in the following Australian properties:

•         the residential property in which Persons A and B reside in, with you and Person A having equal ownership interest; and

•         several investment properties jointly owned with Person A in which you hold the majority of the ownership interests. One of these properties was sold during the ruling period and you had advised your solicitor handling the sale of your residency status and bank so that the non-resident withholding tax could be deducted.

You have an Australian driver's licence.

Person A has employment in Australia and pays for outgoings in relation to your jointly owned properties, such as home loans, council payments, water bills, maintenance and repairs. She also pays for all of Person B's education costs and their living expenses.

You have not sent any money from your earnings in Country X to Australia, with Person A paying for all expenses in Australia out of their income.

It is anticipated that Persons A and B will join you in Country X once Person B has completed their schooling.

In Country X you have:

•         purchased household items to furnish the Property

•         purchased a car for which you have obtained comprehensive insurance

•         a savings bank account in Country X and a credit card that you use in relation to your expenses

•         entered to a contract for your mobile phone, home phone and internet; and

•         driver's licence with the expiry date after the end of the ruling period.

You have been issued an identification card in Country X.

Your mailing address during the some to the ruling period was the Property.

During the ruling period you have participated in numerous professional activities and held multiple memberships in Country X.

While in Country X you have formed friendships with locals, and expats from Australia and other countries, however due to COVID-19 lockdowns social meeting and activities have been restricted. You are part of, and use, social media platforms to keep in touch with your friends.

You have memberships in several stores and clubs in Country X.

You have not held any memberships in religious groups or participated in social activities in Australia since you departed Australia.

You expect Person B to finish their schooling after the end of the ruling period.

It is anticipated that Persons A and B will commence living with you permanently in Country X after Person B has completed their schooling subject to any unforeseen change/s in circumstances.

Neither you, nor Person A, have ever worked for the Commonwealth Government and are not contributing to the PSS or the CSS Commonwealth Super funds.

Assumptions:

For the purpose of this ruling, it is assumed that your future actions will be consistent with the intentions described above and that during the ruling period:

•         You will remain living in Country X; and

•         The total days of any visits to Australia in each income year will be less than 183 days.

Relevant legislative provisions

Income tax Assessment Act 1997 Subsection 6(1)

Income tax Assessment Act 1997 Section 995-1

Reasons for decision

Resident of Australia for taxation purposes

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.

We have considered the tests in relation to your situation as follows:

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 Taxation Ruling 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.

Application to your situation

We consider that your circumstances are not consistent with residing in Australia. This is because:

•         you physically live in Country X, staying at the same address since you arrived there, and continuing to reside there during the ruling period

•         you have come, and will come, to Australia for short periods to visit your family based in Australia during the ruling period

•         you indicate that Country X is your country of residence on your incoming and outgoing passenger cards

•         you are employed in Country X and will continue to be employed there during the ruling period

•         Persons A and B had tried to live in Country X but had to return to Australia due to Person B's schooling, and they will join you in Country X once Person B has finished their schooling

•         you don't financially support your spouse and child, with Person A paying for expenses incurred in relation to your jointly owned Australian properties, their and Person B's living expenses, and Person B's education expenses; and

•         your mailing address during the ruling period is Country X.

It is viewed that 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.

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, such as 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.

Application to your situation

You were born overseas and came to Australia when you became a permanent resident after a number of years, and an Australian citizen several years later.

You departed Australia to commence your employment in Country X where you will continue to be employed during the ruling period. You have not obtained permanent residency/citizenship to live in Country X indefinitely.

Based on the information provided, it is viewed that your domicile of choice has remained Australia given that you are on an employment sponsored visa that may not be renewed if your employment in Country X ended.

However, you have continued to reside in Country X since your arrival to commence your employment there and have and will continue to reside there during the ruling period.

The Commissioner accepts that your permanent place of abode has changed and is in Country X during the ruling period. Therefore, you are not viewed as being a resident of Australia for taxation purposes during the period covered by this ruling 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.

Application to your situation

You have not been, and will not be, present in Australia for a total of 183 days or more during any income year covered by the ruling period. It is viewed that your usual place of abode is in Country X. 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.

Application to your situation

You are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or any of the other persons listed above. Therefore, you are not a resident under this test.

Conclusion

As you do not satisfy any of the four tests of residency as discussed above, you are not viewed as a resident of Australia for tax purposes during the ruling period.