Edited version of private advice

Authorisation Number: 1051964546079

Date of advice: 24 March 2022

Ruling

Subject: Residency

Question

Were you an Australian resident for taxation purposes for the period of time you worked remotely from Australia for your Country A employer?

Answer

No

Question

Were you an Australian resident for taxation purposes for the period of time after you accepted a formal job offer for employment in Australia?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian citizen.

You moved to Country A over X years ago to work as an employee of an entity operating overseas.

You paid tax as a resident of Country A for the entire duration of this employment.

You held a visa which allowed you to work in Country A as a resident.

You rented a home where you lived during your time in Country A, maintaining sporting and community memberships, subscriptions, and kept your personal belongings.

You did not hold any property or assets in Australia while living in the Country A.

You submitted an online employment application form with an Australian government entity in 20XX.

You had a telephone interview with this Australian government entity in 20XX.

You travelled to Australia in 20XX.

You had return flights booked to return to you home in the Country A, which were cancelled due to the COVID pandemic.

You continued to work for your Country A employer remotely from Australia until a point of time in 20XY.

You retained a rental property in the Country A containing most of your belongings and continued to pay for your Country A health insurance and memberships while working remotely in Australia.

You intended to return to live in the Country A.

You were notified of a potential domestic employment opportunity with the Australian government entity at a point in time in 20XY.

You accepted a formal job offer with the Australian government entity at a point in time in 20XY.

You finished working for your Country A employer at a point in time in 20XY.

You started working for the Australian government entity the day after you finished working for your Country A employer.

You have stayed in the guest rooms of family members in Australia over the duration of the ruling period.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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

Reasons for decision

Question1

Summary

You are not a resident of Australia under any of the 4 residency tests for the period of time you worked for your Country A employer.

Question2

Summary

You are a resident of Australia as you decided to relocate permanently to Australia to begin work for an Australian employer.

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. 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 Residency - Permanent place of abode outside Australia 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.

Application to your circumstances - Period 1

You were not a resident of Australia under the resides test for the period of time you remained working for your Country A employer for the following reasons:

• You were physically present in Australia for an extended period of time only because your flights returning to your home in Country A had been cancelled.
• Your intention and purpose of presence was not to take up residence in Australia at this time.
• Your employment remained in the Country A.
• You maintained your primary residence in the Country A containing most of your personal belongings.
• You maintained health insurance, social and sporting associations, and memberships in the Country A.

Application to your circumstances - Period 2

You were a resident of Australia under the resides test for the period of time after you accepted the job offer in Australia for the following reasons:

• You were physically present in Australia.
• You accepted an offer for permanent employment in Australia.
• Your decided to remain living and working in Australia
• Your intention and purpose of presence was to take up residence in Australia from that point onwards.

You were a resident under the resides test from that point in time onwards

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 are a citizen of Australia and your domicile is Australia. There is no evidence that you changed your domicile to the USA.

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.

Application to your circumstances - Period 1

The Commissioner was satisfied you had a permanent place of abode outside Australia for the period of time you worked for your Country A employer for the following reasons:

• You held ongoing permanent employment in the Country A.
• You rented a home in the Country A where you intended to remain indefinitely.
• You continued to rent your home in the Country A while working remotely in Australia.
• You intended to return to your home in the Country A

Application to your circumstances - Period 2

The Commissioner was not satisfied you had a permanent place of abode outside Australia for the period of time after you accepted the Australian job offer for the following reasons:

• You accepted an offer for permanent employment in Australia.
• Your decided to remain living and working in Australia at that point in time.
• Your intention and purpose of presence was to take up residence in Australia from that point onwards.

You were a resident under the domicile test from that point onwards.

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.

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).

Application to your circumstances

You were present in Australia for the entire 20XY financial year, and taking into account your circumstances as at 30 June 20XY, the Commissioner is not satisfied that your usual place of abode was outside Australia and you did not intend to take up residence in Australia.

By 30 June 20XY you had decided to remain living and working in Australia for the foreseeable future and you are a resident under this test for the 20XY income year.

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 resident under this test.

Conclusion - Period 1

As you did not satisfy any of the four tests of residency for the period of time you continued to work for your Country A Employer, you were not a resident of Australia for income tax purposes for this period.

Conclusion - Period 2

As you satisfied the resides test, the domicile test and the 183-day test for the period of time after you accepted the Australian job offer, you were a resident of Australia for taxation purposes for this period.