Edited version of private advice

Authorisation Number: 1051912674842

Date of advice: 29 October 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes after departing Australia on X May 20XX?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian citizen with no other citizenships who departed Australia with your spouse a couple of years ago, you arrived in Country Z on a tourist visa.

Upon departure you intended to reside in Country Z on a permanent and indefinite basis and not to return to Australia.

Your employment is as a contract employee and likely to be for an indefinite period.

You hold a resident visa, which was sponsored by your employer. Your original visa was sponsored by your spouse.

You have opened a local bank account.

You and your spouse reside in a long-term leased and furnished serviced apartment which is renewed on an annual basis. You do not share the apartment with others, and it is seldom vacant for long periods.

Before departing Australia, you sold almost all furniture and other material household items.

You packed some furniture, all individual and personal belongings and relocated these to Country Z.

You arranged a local mobile phone which has a contract with a local communications company.

You have no material assets or investments in Australia as you sold your vehicle before departure. However, you retain an Australian bank account.

You have advised the Australian Electoral Commission of your departure and have asked that your name be removed from the voting rolls.

You have not informed Medicare of your departure.

You have cancelled your Australian private health insurance policy.

You do not intend to return to Australia except for brief visits of a few days per income year. During the period of this ruling you returned to Australia on one occasion for several days to visit family and friends.

You ceased membership of professional and social groups in Australia before departure. You have maintained your practicing certificate with a professional institution as this is necessary to practice as a professional in Country Z. You have advised the professional institution that you are now working overseas.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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

When considering the resides test the following factors are normally considered:

•         physical presence

•         intention or purpose

•         family or business ties

•         maintenance and location of assets

•         social and living arrangements.

In your case, you are a citizen of Australia who departed Australia a couple of years ago.

During your time overseas you travelled to Australia on one occasion to visit friends and family.

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 upon departure was to work in Country Z on an indefinite basis and not to return to Australia.

You maintained family ties with Australia and anticipate nurturing these ties with regular short visits.

You have established professional, social and sporting connections in Country Z and have withdrawn from those in Australia - apart from your family relationships.

You are not considered a resident for tax purposes under the resides test after departure because-

•         You are not maintaining an enduring association with Australia via an abode in Australia which remains available to you

•         You maintain family ties with Australia but have moved overseas with your spouse

•         You do not support any of your Australian family financially

•         You have severed social, sporting and most professional connections with Australia.

Your circumstances taken together lead to a conclusion that you are a non-resident under this test.

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.

In your case, you are a citizen of Australia. You have left Australia and have chosen to live in Country Z. You have not been granted, nor have you actively sought, permanent residency in any other country.

You have not abandoned your domicile in Australia and acquired a domicile of choice in Country Z as you do not yet have the right to reside permanently in that country. This is because you have not yet actively applied for, nor been issued, a visa that will allow you or to remain there indefinitely.

Therefore, you will be a resident of Australia under this test unless the Commissioner considers you have established a permanent place of abode outside of Australia.

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 outside of Australia as:

•         You have no residential home in Australia that remains available to you.

•         You have set up an established home with your spouse in Country Z.

•         You have visited Australia only once since your departure to maintain family connections and expect to continue with such visits in future years.

•         Your spouse travelled with you to Country Z.

You intend living in Country Z for a considerable and indeterminable time. Further, you have abandoned your residence in Australia and your connections to Australia.

The duration and continuity of your presence in Country Z supports the argument that you established a long-term place of abode outside Australia. Your intended duration in there indicates permanency.

You have maintained an association with Australia through family relationships, but your spouse moved with you when you departed Australia. These suggest that you have established a long-term abode in Country Z while maintaining some family associations and connections with Australia.

Consequently, the Commissioner is satisfied that you have a permanent place of abode outside Australia, and you are therefore a non-resident under the domicile test of residency during the period in Country Z.

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 are not a resident for tax purposes under this test.

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.

You are not a resident for tax purposes under this test.

Residency status

As you satisfy none of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a non-resident of Australia for income tax purposes after departing Australia.