Edited version of private advice

Authorisation Number: 1051979715826

Date of advice: 12 May 2022

Ruling

Subject: Residency

Question

Are you an Australian resident for tax purposes whilst overseas?

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:

31 December 20XX

Relevant facts and circumstances

Person 1 was born in Country X and is a citizen of Country X.

Person 1 migrated to Australia and became an Australian citizen.

Person 1 has resided in Australia permanently since migrating to Australia.

Person 2 was born in Country Y and is a citizen of Country Y.

Person 2 migrated to Australia and became an Australian citizen.

Person 2 has is the spouse of Person 1.

Person 1 experienced the onset of a debilitating illness several years ago and has not been able to work since then.

Person 2 has been the main carer for Person 1 and assists them with daily tasks.

Person 1 has trialled various medical treatments available in Australia which were found to be unsuccessful.

You located a specialist in Country Z who specialises in the treatment of Person 1's illness.

The specialist in Country Z agreed to treat Person 1 for their illness.

You departed Australia in order for Person 1 to commence medical treatment in Country Z.

You intend to stay in Country Z for the duration of your medical treatment will then return to Australia.

Person 1's medical treatment is estimated to be for X to X years.

Person 2 will continue to care for Person 1 during their treatment.

Person 1's extended family lives in Australia.

Person 2's extended family lives in Country W.

You both obtained a short term tourist visa for Country Z.

You intended to apply for temporary residence visas once in Country Z.

You both have Australian bank accounts.

Person 2 owns shares in Australia.

You purchased three investment properties in order to supplement Person 2's income.

You sold your main residence in order to purchase these investment properties so that you could travel overseas, pay for Person 1's medical treatment and cover living expenses whist you are overseas.

You intended on selling your vehicles which are registered in Person 2's name.

You will rent a home in Country Z.

You intended on taking your personal and household effects with you to Country Z as you were renting a house prior to leaving Australia and it was not possible for you financially to continue renting the home. A storage facility would have incurred a large cost and you did not have any other storage options. You also did not intend on purchasing these items again once you returned to Australia.

When completing incoming and outgoing passenger cards, you both state that you are Australian residents.

Person 1 notified the Australian Electoral Commission that they were departing Australia and that they wished to vote overseas.

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

Person 1 opened a bank account in Country X.

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.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Question

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 (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 will not be consistent with residing in Australia.

Although you intend to return to Australia on the completion of the medical treatment, you will not be physically present in Australia for a substantial period of time.

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.

You immigrated to Australia from foreign countries and acquired a domicile of choice in Australia.

It is considered that you will not abandon your domicile of choice in Australia and acquire a domicile of choice in Country Z. You are not entitled to reside in Country Z indefinitely and are staying there with short term visas.

Therefore, you will retain your Australian domicile.

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 IT 2650 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.

In your case, the Commissioner is not satisfied that your permanent place of abode will be outside Australia while you are overseas. This takes into account that:

•                    you only departed Australia to receive medical treatment overseas that was not available to you in Australia

•                    you will stay in Country Z using short term visas

•                    you will return to Australia once your medical treatment in Serbia has concluded

•                     you have not taken any steps to cut your ties to Australia.

As per the Harding case, you have not definitely abandoned, in a permanent way, living in Australia.

You are 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 have been present in Australia for 183 days or more in the current income year.

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

You are a resident for the current income year under this test.

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

Therefore, you will not be a resident under this test for those years.

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 contributing members 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.

You are not a resident under this test.

Conclusion

You are a resident of Australia for income tax purposes for the relevant income years.