Edited version of private advice

Authorisation Number: 1051980579743

Date of advice: 19 May 2022

Ruling

Subject: Resident of Australia for taxation purposes

Question:

Are you viewed as being a resident of Australia for taxation purposes from the time you relocated to Country B until the end of the ruling period under subsection 6(1) of the Income Tax Assessment Act 1936?

Answer:

No. The Commissioner is satisfied that your permanent place of abode during this period was Country B.

This ruling applies for the following period:

Income year ending 30 June 20XX.

The scheme commences on

1 July 20XX

Relevant facts and circumstances

You were born in Country A and are a citizen of Country A.

You came to Australia and have:

•                lived and established your life in Australia for a number of years prior to the ruling period, jointly purchasing several properties with your defacto partner, Person X (as outlined below)

•                lodged income tax returns for several income years as a resident prior to the ruling period; and

•                obtained your Australian citizenship.

You and Person X had discussed transitioning to Country A for several years but changed your minds when both of you were offered employment in Country B.

You received a letter of employment offer from Company ABC which included the following information:

•                Role - located in Country B

•                Residential base- for the duration of your assignment you will be located in Country B

•                Contract period - XX months

•                Point of hire - Australia

•                Visas - your employment is subject to you having and maintaining a valid working visa for the duration of your employment

•                Annual leave - specified number of annual and personal leave days

•                Travel - one economy class return airfare from host country to point of hire per annum for employee and eligible family members

You accepted the employment offer and the contract commenced on Date 1.

You and Person X had your point of hire changed in your respective employment contracts from Australia to Country A so that you could both visit Country A during your annual leave period with the flight provided by Company ABC.

There is a high likelihood that the contract will be extended at the end of the initial contract period for a further period of the same length, and if so, it is anticipated that you would accept the extension.

You obtained a visa that allows you to stay permanently in Country B for the duration of the visa, which started shortly after Date 1 and will end during the income year following the ruling period. The visa will be extended after that date.

On Date 1, you and Person X departed Australia for Country B. You indicated on your Australian Immigration Outgoing passenger card that your reason for going overseas was to work and live in Country B.

On your arrival in Country B, you and Person X initially stayed onsite and in hotel accommodation during rostered time off.

Your employment contract provides you with an allowance as part of your remuneration package to obtain accommodation during your contract period and Person X entered a lease for a property located in Country B for an initial X month period, with you and Person X moving into the leased accommodation from the start date of the lease. The been extended until the income year following the ruling period.

You and Person X will continue to rent while Company ABC pays for your accommodation. You will consider whether you will continue renting or will consider purchasing a property when Company ABC ceases to pay for your accommodation as properties are inexpensive in Country B.

You do not have any plans to return to Australia to live, and do not have return ticket to Australia or any employment being held for you in Australia.

You will not return to Australia during the ruling period and anticipate that in the future you will visit Australia once a year to check your properties and see family and friends.

You have not obtained permanent residency in Country B but will obtain and maintain the relevant visas to enable you to continue to stay and work in Country B.

You have the following in Country B:

•                a driver's licence and anticipate purchasing a vehicle

•                items purchased for your rental accommodation; and

•                membership with a local fitness centre and a sporting club.

You have health care plans in Country B.

You have the following in Australia:

•                joint ownership with Person X in Property A, your main residence before you went to Country B, which has been rented fully furnished through a real estate agent, with excess furniture being sold. Your intention is to continue to rent the property during your absence overseas

•                joint ownership with Person X in an investment property, Property B, that will continue to be rented out while you are overseas

•                a bank account that will be used to collect rental income and pay rental expenses: and.

•                membership with several organisations relevant to your occupation/career.

You informed the following that you were leaving Australia:

•                your bank, so that they would withhold tax due to you being a non-resident

•                the Australian Electoral Commission to remove your name from the Electoral Role prior to you leaving Australia

•                Medicare to advise them that you would not need it as of Date 1; and

•                your private health insurance provider to cancel your insurance policy prior to your departure, with the termination date on Date 1.

Neither you nor Person X are contributing members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

You do have any dependants.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

Resident of Australia for taxation purposes

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:

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.

Application to your situation

We consider that your circumstances are not consistent with residing in Australia from the time you arrived and relocated to Country B until the end of the ruling period. This is because in your situation:

•                Physical presence - You have been physically in Country B since you relocated there and continue to live there until the present time

•                Intention or purpose - Your stated intention in travelling to Country B was to work and live there for a long period, and you have and will actively obtain and maintain visas as required to enable you to stay in Country B in accordance with your employment contract. You travelled to Country B on a one-way ticket and will not return to Australia during the ruling period. It is anticipated in the future you will visit Australia one time each income year to check on your properties and visit family and friends

•                Behaviour - Your behaviour since being in Country B shows that you have settled there and reflects a degree of continuity, routine or habit that is consistent with relocating to Country B. Your behaviour supports your stated intention to live and work in Country B

•                Family and business/employment ties - You have full-time employment in Country B for the duration of your contract employment for several years, with potential for it to be extended for a further period, which you will accept. You do not have any dependants and have travelled to Country B with Person X

•                Maintenance and location of assets - You jointly own properties located in Australia that will be rented during your absence overseas, and a bank account. Since arriving in Country B you have purchased items to use in your apartment, and obtained a driver's licence with the intention to purchase a car; and

•                Social and living arrangements - You have joined a fitness club and sporting club since being in Country B. You are living in rental accommodation leased by Person X, with the lease ending after the ruling period.

Therefore, from the date you arrived in and relocated to Country B until the end of the ruling period you are viewed as being a non-resident of Australia for taxation purposes.

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.

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.

Application to your situation

In your case, you were born in Country A and your domicile of origin is Country A. You came to Australia and became an Australian citizen but have maintained your Country A citizenship.

Although you were not born in Australia and it is therefore not your domicile of origin, you may have acquired a domicile of choice in Australia at some point. However, we have been provided with insufficient information to determine if you have abandoned your domicile of origin, Country A, and had made Australia your domicile of choice given that you have dual citizenship with both Australia and Country A.

You obtained visas that enabled you to stay in Country B so that you could work there in accordance with your employment contract but have not chosen to migrate to Country B.

If your domicile of choice was Australia, you would not be viewed as having abandoned your domicile in Australia as you have not actively applied for, or been issued, with a visa that would allow you to remain in Country B indefinitely.

As we are not able to determine that your domicile is not Australia, we have considered where your permanent place of abode was for the period after you arrived in and relocated to Country B until the end of the ruling period.

Based on the information provided the Commissioner is satisfied that your permanent place of abode from when you arrived in and relocated to Country B until the end of the ruling period was outside Australia. This considers that:

•                you intend to permanently reside in Country B in line with your employment contract for several years, which potentially will be extended for an additional period

•                you stayed in onsite accommodation provided by your employer when you initially arrived in Country B, moving into accommodation leased by Person X which you continue to reside in, with the current lease ending after the ruling period

•                your jointly owned home and investment property in Australia are being rented out during your absence overseas

•                you have maintained a bank account in Australia to be used in relation to the rental of the properties

•                you informed your bank, the Australian Electoral Office, Medicare, and your private health insurer that you were leaving Australia

•                you are integrating yourself socially in Country B and have purchased items to be used in your rental accommodation; and

•                you will not return during the ruling period and intend to return to Australia once a year in future income years to visit family and friends and check on your properties.

Therefore, you are not a resident of Australia under this test for the period commencing when you arrived in and relocated to Country B until the end of the ruling period.

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.

Application to your situation

You departed Australia on Date 1 and were overseas in Country B for several months from the date you arrived there until the end of the relevant income year.

Therefore, as you were not present in Australia for 183 days or more during the relevant income year, you are not a resident under this test during that 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.

Application to your situation

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

In your situation, you do not satisfy the 183 day, the resides or superannuation tests from the time you arrived in and relocated to Country B until the end of the ruling period, and the Commissioner is satisfied you have established a permanent place of abode outside Australia in Country B during that period.

Therefore, you are not a resident of Australia for income tax purposes for the period commencing when you arrived in and relocated to Country B until the end of the ruling period.