Edited version of private advice

Authorisation Number: 1051912521113

Date of advice: 21 October 2021

Ruling

Subject: Residency for income tax purposes

Question

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

General facts

You were born in Australia.

You are an Australian citizen.

You left Australia to travel to Country A to live and to work.

When you left Australia, you:

•         advised your Australian financial institutions, including Australian companies with whom you have investments with that you are a foreign resident so that non-resident withholding tax can be deducted;

•         advised your private health insurance provider to have your policy suspended or cancelled; and

•         informed the Australian Electoral Commission and Medicare that you were departing Australia.

When completing incoming and outgoing passenger cards, you state that you are a resident of Country A and you state the address on these documents as Country A address.

You entered Country A on the provision of the B permit (Resident foreign nationals) which is renewable every 5 years and allows you live and work in Country A.

You are a resident of Country A and have paid tax in the country over the past 10 years.

You live in Country A with your spouse and children.

Your children attend school in Country A and your spouse has employment in Switzerland.

Your spouse and children are citizens of Country A.

You have been travelling between Country A and Australia for work and holiday.

You arrived back in Australia on XX August 20XX and have since travelled back and forth from XXX several times to see your family.

On XX March 20YY you left Australia to travel back to Country A after realising that Australia would close its borders due to COVID19 restrictions and your family would not be able to relocate back to Australia.

You currently live in Country A and intend to relocate your family back Australia when the borders re-open.

Accommodation and assets

You do not have a permanent place of abode available to you in Australia.

When travelling back to Australia you stayed with a variety of friends and family.

You own an apartment with mortgage in XXX, State of XX which has been rented out since 20XX.

You are currently renting an apartment in Country A.

You have a standard bank account in Country A.

When you moved to Country A, you took all your personal belongings with you.

Income and employment

After arriving back in Australia on XX August 20XX, you obtained employment on a casual basis with XXXX (employer) as an XXX consultant.

You informed your employer that you were intending to be a permanent resident and therefore should be taxed as a permanent resident, when completing your Tax File Number declaration.

You are still employed with XXXX but as a sub-contractor based in Country A under the Country A tax regime.

You are a member of the Public Sector Superannuation Scheme (PSS), but neither you nor your spouse were a Commonwealth of Australia Government employee for superannuation purposes during the ruling period.

Relevant legislative provisions

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 are a resident of Country A and have paid tax in the country over the past XX years.

•         When completing incoming and outgoing passenger cards, you state that you are a resident of Country A and you state the address on these documents as Country A address.

•         You live in Country A with your spouse and children.

•         Your children attend school in Country A.

•         Your spouse and children are citizens of Country A.

•         When you moved to Country A, you took all your personal belongings with you.

•         You are currently employed as a subcontractor in Country A and your income is assessed under tax regime of Country A.

Accordingly, 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 Australia and your domicile of origin is Australia.

It is considered that you did not abandon your domicile of origin and acquire a domicile of choice in Country A. You were not entitled to reside in Country A indefinitely and while living in Country A, you only held a temporary permit which is renewable every 5 years.

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 left Australia to travel to Country A to live and to work.

•         You are a resident of Country A and have paid tax in the country over the past XX years.

•         You live in Country A with your spouse and children.

•         Your children attend school in Country A and your spouse has employment in Country A.

•         Your spouse and children are citizens of Country A.

•         When you left Australia, you:

­   advised your Australian financial institutions, including Australian companies with whom you have investments with that you are a foreign resident so that non-resident withholding tax can be deducted; and

­   advised your private health insurance provider to have your policy suspended or cancelled.

­   informed the Australian Electoral Commission and Medicare that you were departing Australia.

•         When completing incoming and outgoing passenger cards, you state that you are a resident of Country A and you state the address on these documents as Country A address.

•         You are currently renting an apartment in Country A.

•         You have a standard bank account in Country A.

•         When you moved to Country A, you took all your personal belongings in Australia with you.

•         On XX August 20XX you returned to Australia and obtained employment on a casual basis with XXXX (employer) as an XXX consultant throughout the ruling period.

•         You informed your employer that you were intending to be a permanent resident and therefore should be taxed as a permanent resident, when completing your Tax File Number declaration.

•         Since arriving back in Australia, you have since travelled back and forth from XXX several times to see your family.

•         You do not have a permanent place of abode available to you in Australia.

•         When travelling back to Australia you stayed with a variety of friends and family.

•         You own an apartment with mortgage in XXX, State of XX which has been rented out since 20YY.

•         On XX March 20XX, you left Australia to travel back to Country A after realising that Australia would close its borders due to COVID19 restrictions and your family would not be able to relocate back to Australia.

•         You currently live in Country A and intend to relocate your family back Australia when the borders re-open.

•         For the ruling period you were working for XXXX (Australian company) as a sub-contractor based in Country A under the Country A tax regime.

While you have indicated that your intention is to relocate your family to Australia once the boarders are re-opened, this factor in itself is not conclusive and other factors needs to be considered. On balance and based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia for the relevant income years. Accordingly, you were not a resident 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 year. 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.

The Commonwealth superannuation fund test is designed to ensure that Commonwealth government employees working at Australian posts abroad (such as diplomats and officials of the Department of Foreign Affairs and Trade) are treated as residents (and, as a consequence, so too are their spouses and children under 16 years of age). The test mainly concerns persons who generally reside in Australia but who leave Australia temporarily and are not actually living in Australia during the year of income (Taxation Ruling IT 2681 para 21).

Both the Superannuation Act 1990 and the Superannuation Act 1976 include permanent and some categories of temporary employees in their definition of member or eligible employee. Thus, if an individual is no longer employed by the Public Service in those capacities they will fail this test.

You were an employee of an Australian Government agency in the 19XX's and are a member of the Public Sector Superannuation Scheme (PSS). However, neither you nor your spouse were a Commonwealth of Australia Government employee for superannuation purposes during the ruling period. Thus, you are not a resident under this test.

Conclusion

As you do not satisfy any of the four tests of residency, you are not considered a resident of Australia for income tax purposes for the years ended 30 June 20XX and 20XX.