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Edited version of private advice
Authorisation Number: 1051927480456
Date of advice: 14 April 2022
Ruling
Subject: Residency
Question 1
Are you a non-resident of Australia for tax purposes from the day of your departure?
Answer
No
Question 2
Did you cease to be an Australian resident when you departed for overseas?
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
You were born in Australia and are an Australian citizen.
You are married with children.
You own a family home in Australia as your main residence and have a mortgage.
You have a superannuation account, joint bank account and credit card in Australia.
You signed an employment contract with Company A for a permanent full-time role to work overseas, with a 3-month probationary period.
Your family planned to join you overseas during the school holiday periods until they could join you permanently 20 months later.
Flights were booked around school holidays and subsequently cancelled due to the pandemic and border closures.
You applied and were granted a work permit.
Approximately three months after signing the employment contract you departed Australia.
Company A paid for a 2-bedroom accommodation for two months to assist you with your relocation while you were finding permanent accommodation for yourself and your family.
You then resided in temporary furnished Apartments.
You opened an overseas bank account to receive your salary and a statutory retirement account. You also have a credit card.
You took part in Company A soccer and basketball games and used the gym facilities.
You purchased household effects for the arrival of your family.
You obtained an overseas driver's licence to use your company car.
You were approved as an eligible overseas elector.
Two months after leaving Australia, Company A requested you work from home, following national recommendations.
The next day you returned to Australia before the international borders closed.
Company A mandated staff work from home.
There was a changing situation as Australia and overseas battled with the pandemic.
Australia was considerably safer than overseas, and your family home location had nil Covid-19 cases at that time.
Approximately five months after arriving back in Australia you received a letter from Company A advising you that the organisation was bringing working from countries of origin to an end and requested you return overseas.
You applied to the Department of Home Affairs for a travel exemption to return to work overseas.
The Department of Home Affairs granted you an exemption to depart Australia on the ground you were relocating for a period longer than 3 months.
XX months after being requested back to work in the office you departed Australia.
During your absence, you maintained your apartment overseas.
You paid the rent, kept utilities connected and kept it ready for your return. No items had been stored, your personal effects and clothing remain and there has been no subleasing to any other person.
XX months after you departed Australia for the first time you signed a 12-month lease for a 2-bedroom apartment.
About a week later you moved into the apartment, with your belongings and household furniture and kitchenware ordered a few days after signing the lease.
Overseas government recommended office closures and working from home.
You returned to Australia approximately one month after moving into the apartment.
You made several bookings to return overseas - all were cancelled
You became eligible to receive the COVID-19 vaccine in Australia.
Approximately xx months after returning to Australia you departed for overseas once you were fully vaccinated.
At this time, you and your spouse made the decision that your family would not join you overseas.
You and your spouse agreed that you would not renew the lease of the apartment.
You moved into a smaller furnished apartment owned by Company A and sold many of the household furniture and effects.
You are the only occupant of the apartment.
You returned to Australia for the birth of your second child.
You intended to return overseas following the birth of your child.
Company A changed your contract from local overseas employment to a consultant working from Australia due to the ongoing difficulties of being overseas during the pandemic.
It is now likely that you will live in Australia and only visit overseas periodically.
You were working overseas hours while in Australia - working through the night and sleeping during the day.
You joined your local soccer club to keep fit until returning overseas.
You were overseas for the following periods:
• Period 1 Approximately XX days
• Period 2 Approximately XX days
• Period 3 Approximately XXX days
You do not intend to permanently abandon Australia as your long-term home.
Relevant legislative provisions
Income Tax Assessment Act 1936 sub-section 6(1)
Income Tax Assessment Act 1997 sub-section 995-1(1)
Reasons for decision
Summary
Having considered your circumstances as a whole and the residency tests, it has been determined that you continued to be a resident of Australia for income tax purposes after you left Australia.
Detailed reasoning
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. 3rd 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 your situation
• You were born in Australia and are an Australian citizen.
• You moved overseas without your family for work purposes, having been offered and accepting a full-time permanent role.
• Your spouse and children stayed in your family home.
• You spent approximately xx days overseas before returning to Australia
• You returned to Australia as you did not want to get locked out of Australia as Australia were closing international borders and the risk of having no access to your family becoming apparent.
• Your family home location had no local cases of Covid-19.
• You returned overseas when required.
• You stayed in the family home while in Australia with your spouse and children.
• While in Australia, overseas Covid-19 cases increased dramatically, whilst you became eligible to receive the vaccine in Australia.
• You stayed in Australia until you were fully vaccinated then returned overseas.
• You spent approximately ten months continuously in Australia due to lockdowns and restrictions.
• You and your spouse made the decision that your family would not join you overseas following the birth of your second child though your employment would remain overseas.
• You and your spouse agreed that you would not renew the lease of the 2-bedroom apartment.
• You returned to Australia for the birth of your second child after being overseas for approximately 112 days.
• Company A changed your work contract allowing you to work from Australia permanently.
You remained a resident under the resides test as you never cut ties with Australia, particularly given there was going to be a 20-month lag between when you left Australia and when your family joined you. Your spouse stayed in the family home and plans were made to meet up for holidays.
When Covid-19 occurred you returned to Australia to be with your family to avoid being locked out of Australia.
You then spent several months in Australia and another stint of several months in Australia due to lockdowns and restrictions on flying. Although keeping overseas hours while working in Australia, you have stayed connected to Australia in a way that is consistent with you residing here.
We can rely on the decision in Pike v Commissioner of Taxation [2020] FCAFC 158 at [39], in this instance - in that matter they found him to be a resident under the resides test as he was never just a visitor but in fact returning to his family regularly whilst working overseas.
The same reasoning can apply to your situation - even though you found a 2-bedroom apartment, signed a 12-month lease, and purchased household items. It appears you were planning for the time when your family joined you during holidays.
Based on the facts before us, 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.
Generally, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law.
In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country, along with being able to lawfully stay in that country.
Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia (IT 2650) provides further guidance on the Domicile test.
A domicile of choice is therefore not acquired where the person only intends on living in a country for a certain and definite period and for a particular purpose (for example a work assignment for a couple of years) because they will not have the required intention to settle permanently in that country.
The Domicile Act also provides that a person's domicile at the time continues until a new domicile of choice is acquired (section 7 of the Domicile Act 1982).
You do not intend to permanently abandon Australia as your long-term home.
It is considered that you did not abandon your domicile of origin in Australia and acquire a domicile of choice overseas. You were not entitled to reside overseas indefinitely and while living overseas, you only held a work permit.
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. We have taken into account that:
You left Australia for overseas but returned to Australia and remained in Australia for extended periods of time due to Covid-19 and the ability for you to work from home.
You stated that your intention was to permanently move overseas with your family, however your family was not scheduled to join you until approximately 20 months after you initially left Australia.
You maintained your family home in Australia as your family continued to reside in it.
As soon as Covid-19 restriction were to be implemented in Australia through the closure of international borders you did not move your family overseas to be with you, you immediately returned to the family home in Australia for fear of being locked out.
As you continued to work from the family home, your spouse became pregnant with your second child and it was decided that they would not join you overseas and remain in Australia permanently.
You leased a 2-bedroom apartment overseas which you maintained - paid the rent, kept utilities connected and kept it ready for your return - however you were in Australia for approximately ten months - it was at this point that you and your wife decided that your family would not be joining you.
You decided not to renew the lease on the 2-bedroom apartment and moved into a smaller furnished apartment owned by Company A and you sold many of the household furniture and effects.
You applied and were granted a work permit which was granted.
You were overseas for the following periods:
• Period 1 Approximately XX days
• Period 2 Approximately XX days
• Period 3 Approximately XXX days
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 20XX/XX- and 20XX/XX- income years.
We now need to consider whether we are satisfied that, during the 20XX/XX- and 20XX/XX -income years, your usual place of abode was outside Australia, and your intention was to take up residence 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).
In respect of the usual place of abode this takes into account that:
• You were born in Australia and are a citizen of Australia.
• You own a family home in Australia where you, your spouse and children reside as your main residence.
• You continued to maintain the family home while you were overseas as your spouse and children will continue to live there until they plan to join you in 20 months.
• Company A paid for a 2-bedroom accommodation for two months to assist you with your relocation while you were finding permanent accommodation for yourself and your family.
• You then resided in temporary furnished Apartments.
• You purchased household effects for the arrival of your family.
• You obtained an overseas driver's licence so you can use your company car as needed.
• You took part in soccer and basketball games overseas and used the gym facilities at work.
• While back in Australia, you maintained your furnished Apartment. You paid the rent, kept utilities connected and kept it ready for your return. No items have been stored, your personal effects and clothing remain there and there has been no subleasing to any other person.
• You signed a 12-month lease for a 2-bedroom apartment.
• You and your spouse made the decision that your family would not join you overseas following the birth of our second child although your employment would remain overseas.
• You and your spouse agreed that you would not renew the lease of the furnished Apartment.
• You moved into a smaller furnished apartment owned by Company A and sold many of the household furniture and effects that you bought.
• You returned to Australia for the birth of your second child. While in Australia Company A changed your contract from a local employment contract to a consultant working from Australia.
In respect of the intention to take up residence this takes into account you never cut your ties with Australia during the relevant income years and always intended to retain a strong connection to Australia.
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 years ended 30 June 20XX, 20XX, 20XX.