Edited version of private advice

Authorisation Number: 1051986198080

Date of advice: 24 May 2022

Ruling

Subject: Residency

Question

Are you an Australian resident for taxation purposes after departing Australia?

Answer

No.

This ruling applies for the followingperiods:

Year ended 30 June 20XX to year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

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

You departed Australia to reside in Country A. Your intention was to work and migrate to Country A indefinitely.

You arrived in Country A on a temporary visa for intracompany transfers for people who work in positions which require specialised knowledge.

You transferred from your employer in Australia to the same employer in Country A.

A few weeks after starting with your employer in Country A, you discussed applying for permanent resident visa in Country A with them.

Your employer in Country A engaged a lawyer to apply for permanent residence on your behalf.

You initially lived with a family member in Country A before moving to shared accommodation.

You met your first spouse and married to a citizen of Country A.

You signed a lease with your first spouse for a rental property Country A until you and your first spouse purchased a house together three years later.

You were granted permanent residence in Country A on a marriage basis approximately two years after you arrived.

You divorced your first spouse and married your second spouse, who is a citizen of Country A.

You became a US citizen nine years after arriving in Country A.

Your only family and social connection to Australia is your parents and other family in Australia.

You have visited Australia on a few occasions for mainly to visit family for varying periods of 2 to 5 weeks on each occasion.

You do not have any significant assets in Australia. Prior to your departure you were renting a property but never owned real estate in Australia.

You had some Australian bank accounts which were closed due to inactivity.

You sold your motor vehicle in Australia prior to your departure to a friend.

You have assets in Country A which comprise of your main residence and multiple bank accounts.

You have lodged income tax returns in Country A since you arrived.

You have worked in various IT companies in Country A since you arrived.

You and your spouse are not contributing members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

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.

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 domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

We have considered the statutory tests listed above in relation to your situation as follows:

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.

Because the ordinary concepts test is whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

Application to your situation

We have taken the following into consideration when determining whether you meet the resides test:

•         You have been physically absent from Australia since the date of your departure. You have only visited Australia on four occasions for a varying period of 2-5 weeks to visit family.

•         Your intention was to migrate and settle in Country A indefinitely and you do not intend to live in Australia for the foreseeable future.

•         You re-located for employment purposes on a permanent basis and have worked in various companies the IT industry in Country A since your departure.

•         You only have social connections with Australia through your family.

•         You have established new social connections in Country A. Your immediate family reside in Country A.

•         You have abandoned your Australian rental property and moved to Country A where you currently reside in your main residence with your spouse.

•         You have taken steps to sever your ties to Australia such as selling your motor vehicle and de-activating your Australian bank accounts.

•         You have taken steps to establish ties with Country A by becoming a permanent resident and later a citizen of Country A, setting up bank accounts, purchasing a main residence and lodging income tax returns in Country A.

You are not a resident of Australia under the resides test for the whole ruling period.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund 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.

Application to your situation

In your case, you were born in Australia and your domicile of origin is Australia. You migrated to Country A, became a permanent resident and later became a citizen of Country A.

It is considered that you did abandon your domicile of origin in Australia and acquire a domicile of choice in Country A. You obtained citizenship in Country A and you intend to live there indefinitely.

Therefore, your domicile is Country A and you are not a resident of Australia under the domicile 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 both:

•         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 have not been present in Australia for 183 days or more during each income year in the ruling period. You are not 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.

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

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 whole ruling period.