Edited version of private advice

Authorisation Number: 1051925923372

Date of advice: 24 November 2021

Ruling

Subject: Residency

Question

Are you an Australian resident for the financial years ending 30 June 2020 and 30 June 2021?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 2020

Year ending 30 June 2021

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are an Australian citizen

You were born in Country A and immigrated to Country B. You became a citizen of Country B before immigrating to Australia. You became an Australian Citizen over 10 years ago and have lived in Australia since arriving from Country B before that.

In early 2020, you separated from your spouse, your children have remained in the care of your spouse. You agreed to pay child support payments, you separated your accounts and home expenses and your family car was transferred to your spouse. Your mortgage account remained open in Australia.

During that same time you cancelled your private health insurance and notified the electoral commission that you should be removed from the electoral roll (effective date of your AEC removal was dated some months later in that same year)

In that same period, you ceased employment with the state government.

Around a month later in that same year, you accepted an offer of employment with an employer in a foreign country ('the foreign country'). You got visa for that country that allowed you to work and reside there, it would be re-issued every 12 months if you retained employment.

In that same month, you departed Australia for the foreign country, completing the outgoing passenger card as 'Australian Resident Departing Permanently'

You arrived in the foreign country the following day and stayed in temporary hotel accommodation provided by your employer which was intended to be in place for two weeks while you searched for permanent accommodation

The day after your arrival, you commenced work with the employer in the foreign country and opened a bank account in that country to receive salary in the local currency, and entered into a mobile phone contract with a service provider in that country.

Less than 10 days after you arrived, you departed the foreign country to return to Australia on the advice from your direct line manager due to the health risk COVID-19 posed and the anticipated border closures. Your agreement with your manager at this time was to return to Australia temporarily until there was a COVID-safe plan in place, then you would return to the foreign country.

At this time, your accommodation ceased, and the hotel stored your belongings (mainly personal clothing) as you intended to return to the foreign country.

The following day, you arrived in Australia, completing the incoming passenger card "visitor or temporary entrant" and answered "no" to the intention to live in Australia for the next 12 months

You took residence with you parents in Australia from your arrival onwards and continued to carry out your employment with the employer in the foreign country remotely.

You took out new private health insurance in Australia with the cover beginning just after your arrival in Australia, but did not apply the rebate.

A couple of months later your employer announced a plan for staff to return to the foreign country in stages

The following month your GP advised you that it was not safe for you to return to the foreign country, and provided a medical certificate to give your employer. Your GP advised that you are at increased risk of complications with Covid-19 as you have a pre existing health condition.

At the end of that month, your employer advised that you must return to the foreign country. Taking into account the advice from your GP, you decided you would not return and responded to your employer advising that you had tendered your resignation

Approximately two weeks after you tendered your resignation was the last day of your employment with the employer in the foreign country. At the time of your resignation, you did not have any new employment commencing.

You commenced new employment approximately a month after ceasing your previous employment.

Later in the year you organised for your belongings to be shipped to your address in Australia from the Hotel in the foreign country they were being stored in.

You no longer have access to your mobile number with the service provider in the foreign country. In turn, you cannot access your bank account in the foreign country without the access to the mobile number.

Relevant legislative provisions

Section 995-1 of the Income Tax Assessment Act 1997

Section 6(1) of the Income Tax Assessment Act 1936

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 217at 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 consistent with you residing in Australia.

This is because:

In early 2020 you separated from your spouse, with the agreement that your children were to remain in the sole care of your spouse. Your financial accounts and expenses associated with your home were separated and you agreed to pay monthly child support. Your family vehicle was transferred to your spouse.

During that same period, your employment with the state government ceased.

You cancelled your Australian private health insurance and removed yourself from the electoral role in Australia (effective date of AEC removal some months later in that same year)

You accepted an offer for employment with an employer in a foreign country ('the foreign country') in the following month.

You departed Australia in that same month to travel to the foreign country to start employment with the employer there. You completed the 'Outgoing Passenger Card- Australia' by selecting 'Australian resident departing permanently'.

You were staying in temporary housing provided by your employer in the foreign country with your belongings for approximately six days after your arrival in that country, with the intention of seeking permanent accommodation in the foreign country.

The day after you arrived in that country, your employment with the employer in the foreign country commenced. You opened a bank account with a bank in that country for the purpose of receiving salary payments. You entered into a mobile phone contract with a phone service provider in that country.

Approximately six days after your arrival, you departed the foreign country to return to Australia on the advice from your direct line manager due to the health risk COVID-19 posed and the anticipated border closures. Your agreement with your manager at this time was to return to Australia temporarily until there was a COVID-safe plan in place, then you would return to the foreign country.

On arrival in Australia you filled out the 'Incoming passenger card- Australia' by selecting you did not intend to live in Australia for the next 12 months.

Upon returning to Australia you lived with your parents.

You took out private health insurance in Australia for cover beginning around a week after your arrival in Australia, but did not apply the rebate.

Your doctor advised it was not safe to return to the foreign country a few months later in response to your employer requesting your return to the foreign country.

You continued working in your position for the employer in the foreign country remotely (from your address in Australia).

Your employer required you to return to the foreign country and you decided you would not return based on the risk of the Covid-19 pandemic and advice from your GP.

You resigned prior to the end of the 2019-2020 financial year, serving out your two weeks' notice period.

Your personal belongings remained in the foreign country until they were later shipped back a few months later.

You have remained in Australia since returning.

You are 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 Fiji and abandoned your domicile of origin of Fiji when you moved to New Zealand in, New Zealand became your domicile of choice at that point. You gained New Zealand citizenship during that period. You immigrated to Australia and Australia became your domicile of choice. You became an Australian Citizen. Since then, Australia has been your domicile of choice.

It is considered that you did not abandon your domicile of choice in Australia and acquire a domicile of choice in the foreign country. You were not entitled to reside in the foreign country indefinitely and you held a work permit which was valid until for 12 months at a time while you remained employed.

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 not satisfied that your permanent place of abode is outside Australia. This takes into account that:

You lived in Australia with your spouse and children until early 2020, you separated from your spouse and left Australia for the foreign country in the following month in the same year.

Your stay in the foreign country was approximately six days, although you initially intended to reside there while you worked for the employer in the foreign country.

You did not acquire permanent accommodation in the foreign country

You returned to Australia on advice from your line manager because you were concerned about the health risks Covid 19 posed and possible border closures. You intended to return to the foreign country when it was safe to do so.

You did not return to the foreign country when your employer requested it and resigned from your role with the employer in the foreign country prior to the end of the 2019-2020 financial year.

You did not establish a home or connections outside of Australia.

Your family (including parents and children) reside in Australia.

You are a resident of Australia under the domicile test outlined in the definition of 'resident' in subsection 6(1) of the ITAA 1936.

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 been in Australia for 183 days or more in the 2020 and 2021 income years. We now need to consider whether we are satisfied that, during the 2020 and 2021 income years, your usual place of abode was outside Australia and your intention was to reside in Australia.

In the context of the 183- day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. A person can have only one usual place of abode under the 183- day test. However, it is also possible that a person does not have a usual place of abode. This is the person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, it is necessary to examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode (Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836).

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts.

Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia for the relevant income years and that you did not intend to reside in Australia.

While it may be considered that you did not intend to reside in Australia for the period between your return to Australia on 13 March and your resignation from your employment in the foreign country on 29 June of that year, you did not have a usual place of abode outside Australia and therefore this test is not satisfied.

In respect of the usual place of abode this takes into account that:

• You lived and worked in Australia for the period before your departure to the foreign country in early 2020
• You had private health insurance for this period which you ended on your departure for the foreign country in early 2020 and you took out new private health insurance when you returned to Australia with the cover commencing approximately a week after your return.
• You were enrolled on the electoral roll and were considered an Australian resident for taxation purposes by your previous employers. You notified the Australian Electoral Commission (AEC) you should be removed from the electoral roll when you left Australia, the AEC notified you this was effective some months later.
• You maintain connections with Australia as your family, including your parents and children, remain living in Australia.
• You did not obtain permanent accommodation in the foreign country.
• You returned to Australia approximately six days after arriving in the foreign country, and lived with your parents at in Australia while carrying out your duties remotely for your employer in the foreign country.
• You were unable to return to the foreign country and resigned from your employment on prior to the end of the 2019-2020 financial year, with your last day of employment being approximately two weeks after you tendered your resignation.

In respect of the intention to take up usual place of abode this takes into account that:

• You intended to reside in the foreign country while you worked for the employer in the foreign country.
• On your outgoing passenger card when you departed Australia in early 2020 you indicated you were an Australian resident leaving permanently
• You did not acquire permanent accommodation in the foreign country.
• You departed the foreign country for Australia approximately six days after your arrival, and with the intention to return to the foreign country when it was safe to do so
• You received medical advice a few months later that it was not safe for you to return to the foreign country.
• In that same month you resigned from your employment with the employer in the foreign country effective approximately two weeks later as you decided you were unable to return to the foreign country.

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.

Conclusion

You satisfy the resides, domicile and 183 days tests of residency and so are a resident of Australia for income tax purposes for the relevant years.