Edited version of private advice

Authorisation number: 1051967663719

Date of advice: 8 April 2022

Ruling

Subject: Residency

Question

Are you an Australian resident while living in Country Y for X years?

Answer

No

This ruling applies for the following periods:

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

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Person X was born in Country Y and is a citizen of Country Y.

Person Y was born in Australia and is an Australian citizen.

You are in a domestic partnership.

Person X entered Australia on a Special Category Visa.

Person X's visa allows them to stay in Australia permanently.

You have been living together in Australia since 20XX.

Person X has worked for their employer since 20XX.

You have children together.

You have purchased a home in Australia together.

Person Y is a part-owner in a business in Australia.

You moved to Country Y to be near a relative.

You rented out your home in Australia.

You are renting a property in Country Y.

You intend to stay in Country Y for X years.

You will continue to work for your employers remotely whilst in Country Y.

You intend to travel to Australia approximately X to X times per year over the coming years, depending on Covid-19 border restrictions.

Person Y will continue to own a business in Australia.

Person X has a driver's license in both Australia and Country Y.

Person Y has an Australian driver's licence and plans to obtain a drivers' licence in Country Y.

You did not inform the Australian Electoral Commission or Medicare that you were departing Australia.

You will continue with your private health insurance policies whilst in Country Y.

You have a joint bank account in Country Y.

Person X has X Australian bank accounts.

Person Y has X Australian bank accounts.

Person X has shares in Australia.

You stored some of your household effects at Person Y's parents' home in Australia, kept some items in the home you are renting out and sold some of your other items.

Your personal effects were stored at Person Y's parents' home in Australia.

You are not Commonwealth of Australia Government employees for superannuation (super) purposes.

You are not members of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You have not advised any Australian financial institutions including any Australian companies with whom you have investments with that you are foreign residents so that non-resident withholding tax can be deducted.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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

Reasons for Decision

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 Taxation Ruling 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.

We consider that your circumstances are not consistent with residing in Australia.

This is because you and your family have rented out your home, stored or sold your household effects, have departed Australia, and do not plan to live in Australia for X years.

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 Person X's case, you were born in Country Y and your domicile of origin is Country Y. You arrived in Australia in 20XX. You then decided to leave Australia and return to Country Y for X years.

It is considered that you did not abandon your domicile of origin in Country Y and acquire a domicile of choice Australia.

Therefore, Person X is not a resident of Australia under this test.

In Person Y's case, you were born in Australia and your domicile of origin is Australia.

It is considered that there is insufficient evidence to say that you have or will abandon your domicile of origin in Australia and acquire a domicile of origin in Country Y.

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 Person Y will have a permanent place of abode is outside Australia. This takes into account that you will not have a home available to you in Australia and will be living in Country Y for X years.

Therefore, you are not a resident of Australia 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 been present in Australia for 183 days or more in the 20XX income year. We now need to consider whether we are satisfied that, during the 20XX income year, 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).

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

Based on your circumstances, as at the end of the 20XX income year the Commissioner is satisfied that your usual place of abode will be outside Australia and that you will not be intending to reside in Australia.

You will not be present in Australia for more than 183 days in the other relevant income years.

Therefore, you will not be 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.

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

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the relevant income years.