Edited version of private advice

Authorisation Number: 1051911696864

Date of advice: 29 October 2021

Ruling

Subject: Residency status for income tax

Question

Were you a resident of Australia for income tax purposes for the years ended 30 June 2016 to 30 June 2022?

Answer

No

This ruling applies for the following periods:

1 July 2015 to 30 June 2022

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You became an employee of the XYZ organisation, headquartered overseas in February 201X.

At the commencement of your employment with the XYZ organisation, you were deployed to a third country as part of the XYZ organisation's mission in that country.

You were required to take leave from that location according to the XYZ organisation's requirements. Your designated destination for paid recreation leave was in a neighbouring country, however travelling beyond that country was each individual employee's choice.

Your initial assignment in the third country where you were deployed was from February 201X to August 201X.

You left Australia on assignment XX February 20XX.

In that location you leased a residential property, which you had sourced and entered into lease agreements directly with the landlord. The leases were for six-monthly periods and were renewable. The house was fully furnished, and cleaning and gardening services were provided under the terms of the lease.

In August 20XX, you were required to relocate to another location within that country for a year, where you resided with a friend whose housing was paid for by your friends' employer. Accordingly, you did not pay any rent but did contribute to the household running costs.

Following a redeployment to the original location, you leased a residential property (a different residence than held previously) which you sourced and entered into lease agreements directly with the landlord. Again, the lease was for six monthly periods and renewable, and the property leased was a house that was fully furnished and cleaning / gardening services were provided under the terms of the lease.

Your salary is currently remitted into an offshore bank account.

Since 201X you have been returning to Australia two to four times a year to see family and friends. During your time in Australia you would see your doctor and dentist and renew items such as a Medicare card and driver's license. You did not retain any health insurance in Australia. The XYZ organisation has its own subsidized health insurance plan that is international and covers your health needs in countries like location as well as Australia.

You have remained enrolled on the Australian Electoral Roll for the entire period since 201X.

Since your departure in 201X, you have not returned to Australia for more than 183 days in a 12-month period.

You are a non-contributing member of a Commonwealth Superannuation Fund (being the PSSap scheme) from when you worked for the Australian government. You have not paid into the scheme since you joined the XYZ organisation in 201X. The XYZ organisation has its own pension scheme.

You have no children and your immediate family members reside in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995(1)

Income Tax Rates Act 1986 subsection 3A

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 established an abode overseas which involved you leasing a property between August 201X and August 201X. You had your clothes and bedding with you during this time.

•         In August 201X you moved into another property with a friend where you contributed to household running costs.

•         You sometimes returned to Australia during the period 201X to 202X for short breaks, however your physical presence in Australia between 201X to 202X was minimal.

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 19XX and your domicile of origin is Australia.

It is considered that you did not abandon your domicile of origin in 20XX and acquire a domicile of choice in 20XX. You were not entitled to reside in location indefinitely and while living in location, you only held a work permit which was valid until the end of your assignment with the XYZ organisation. Your application does not indicate an intention to move permanently to location. You still consider Australia to be your home.

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:

•         You worked for the XYZ organisation in location since August 20XX, only returning occasionally to Australia. During these times, you visited your family (mother and brother); went to the doctor and dentist and renewed Australian items such as your Medicare card and Driver's licence. We consider these activities to be incidental and minor.

•         You had established an abode in location which involved you leasing a property between August 20XX and December 201X. You had your clothes and bedding with you during this time.

•         In August 201X you moved into another property with a friend where you contributed to household running costs.

•         Since your departure from Australia in 201X, you have not re-established any property in Australia as your home.

•         We consider that from the time you left Australia on XX September 20XX, you had definitely abandoned your Australian residence to have a permanent place of abode overseas.

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 not been present in Australia for 183 days or more during the income years 201X to the present. 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. The PSSap fund (which you are a member of) is not a relevant fund for the purposes of 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 for the period 1 July 201X to 30 June 202X.