Edited version of private advice

Authorisation Number: 1051972423487

Date of advice: 14 April 2022

Ruling

Subject: Residency

Question 1

Are you a non-resident for tax purposes from the date you leave Australia?

Answer

No.

Question 2

Are you a non-resident for tax purposes from the date your family leaves Australia to join you in Country Z?

Answer

Yes.

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

You were born in Australia.

You are an Australian citizen.

You have received a job offer in Country X.

You intend to travel to Country X to become a resident doctor.

You have applied for a work visa.

You intend to leave for Country X before 30 June 20XX.

If you pass your probation, you will obtain a resident visa in Country X.

You intend to cancel your ABN once you have obtained a resident visa.

You have the option to stay in accommodation provided by your employer.

You intend to sign a lease on a rental property once your visa has been approved.

You intend to stay in Country X for a minimum of two years.

You intend to suspend your private health cover in Australia.

You intend to sign up for private health cover in Country X.

You do not intend to make any return visits to Australia in the next two years.

Once you have departed Australia you will state that you are a non-resident and provide your address in Country X on incoming and outgoing passenger cards.

Your family are citizens of Australia.

Your family are not travelling with you to Country X immediately until you have passed your probation and your children have finished their school year in Australia.

Your employer will assist with obtaining visas for your family to live in Country X with you.

You will financially support your family prior to them joining you in Country X.

You own a property in Australia.

You do not have a mortgage on the property you own in Australia.

You intend to rent out your home in Australia once your family have moved to Country X.

You intend to apply for a driver's licence in Country X.

You go to church in Australia.

You intend to find a new church in Country X.

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

Neither you nor your spouse are members of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

Question 1

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 will not be consistent with residing in Australia from the date you leave Australia.

This is because you will be living in Country X, you will work for an employer who is based in Country X and you do not intend to visit Australia in the years going forward.

You will not be 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 Australia and your domicile of origin is Australia.

It is considered that you will not abandon your domicile of origin in Australia and acquire a domicile of choice in Country X. You will not be entitled to reside in Country X indefinitely as you will only hold a work visa.

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.

Based on the above factors, the Commissioner is not satisfied that your permanent place of abode will be outside Australia until your family leaves Australia and joins you in Country X.

This takes into account that your family will remain in Australia until your children finish the current school year, your home in Australia is still available to you and you will be financially supporting your family whilst they are living in Australia.

However, the Commissioner is satisfied that after your family departs Australia and joins you in Country X and your family home in Australia is no longer available to you, your permanent place of abode will be outside Australia and you will not be a resident 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 will be present in Australia for more than 183 days in the 20XX income year and the Commissioner is not satisfied that your usual place of abode will be outside Australia.

Therefore, you are a resident under this test for the 20XX year.

However, the Commissioner is satisfied that for the following income years where you will not have been present in Australia for 183 days or more, 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

You will be a non-resident for tax purposes from the date your family leaves Australia to join you in Country X.