Edited version of private advice

Authorisation Number: 1051987507543

Date of advice: 27 May 2022

Ruling

Subject: Residency

Question

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

Answer

No.

This ruling applies for the following periods:

Year ended 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 and an Australian Citizen.

You departed Australia to Country A.

You were employed to work with your employer in Country A.

You have a full time employment contract with your employer which has a rolling engagement period.

Your intention is to reside and continue your current employment in Country A for at least the engagement period and for the foreseeable future.

You have been granted a residency visa which enables you to work, reside and become eligible for health benefits in Country A as long as you are employed.

All employees and their families working on the project reside on site in a community, where there are individual units, which are provided by the employer. It resembles a small town with infrastructure.

You have a housing agreement for a unit. The agreement specifies you are allowed to live there permanently and you have occupied the same dwelling since you commenced living in the community.

You have decorated the unit with various artworks brought from Australia and personal collectibles brought from Australia and Country A. You also have books and sporting equipment in the dwelling.

You are involved in various community groups/clubs and participate in community social events.

You are a member of various sporting groups and have participated in sporting events in Country A.

The community has various social activities you participate in.

You are also a member of a union for employees within the community.

Since your departure from Australia, you have returned and intend to visit Australia for no more than 45 days each income year.

During your visits to Australia, you spent time with your family and friends. You stayed in your former family home, where you did not undertake any of your employment duties.

You financially support your family who are still residing in Australia and still have a mortgage on your family home.

Your children remain in Australia. All your children are independent adults with part time employment and enrolled in university. They will remain residing in the family home.

Your spouse remained in Australia to look after a family member. Your spouse is the primary contact and carer the family member who has medical issues.

Your spouse is currently in Country A and is looking into residing in Country A on a temporary basis.

You have removed yourself from the Australian Electoral Roll.

You notified your sporting clubs that you were departing Australia and you either became an overseas member or the membership was put on hold.

You have an Australian bank account and superannuation fund. You and your spouse own a property which is the family home in Australia.

You have a bank account and mobile phone account in Country A.

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

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Overview of the law

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 (also referred to as the ordinary concepts test)

•         the domicile test

•         the 183-day test, and

•         the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides 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 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' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

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.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

It is important to note that no 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 physically been absent from Australia for more than six months per income year since your date of departure.

•         You only visited Australia for 45 days or less each income year to visit family and friends. You intend to only visit Australia for the same amount of time for the same purpose in future income years.

•         Your intention is to work and reside in Country A for more than three years.

•         You are employed in Country A on a rolling engagement period.

•         You have a dwelling in Country A which is fully furnished with your household and personal effects.

•         You have a housing agreement with your employer which lets you reside there on a permanent basis.

•         You have severed your social connections in Australia.

•         You have established new social connections in Country A.

•         You have taken steps to sever ties with Australia such as removing yourself from the electoral roll.

•         Your spouse has accompanied you to Country A and is considering residing there on a temporary basis.

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 in 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 a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and 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.

It is considered that you have not abandoned your domicile of origin in Australia and acquired a domicile of choice in Country A. You obtained a residency visa in Country A which allows you to reside, work and gain access to health benefits as long as you are employed. However, you have not taken any steps to obtain citizenship and your visa does not allow you to reside in Country A indefinitely.

Therefore, your domicile is Australia.

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 phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. 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 their permanent place of abode outside Australia are:

•         whether the taxpayer has definitely abandoned, in a permanent way, living in Australia

•         whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

(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

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•         You have been present in Country A for a substantial period of time.

•         You only visited Australia for 45 days or less each income year to visit family and friends. You intend to visit Australia for the same amount of time for the same purpose in future income years.

•         You do not have an intention to return to Australia at a definite point in time. Your intention is to remain in Country A to reside and work for the foreseeable future.

•         You have established a home in Country A that has been furnished with household and personal effects. You are allowed to live there on a permanent basis.

•         You have lived in the same dwelling the whole time you have been in Country A.

•         You have established a continuing association with Country A by having a bank account, mobile phone, employment, social ties, and community ties.

•         You have limited durability and association with Australia. You only have a bank account, superannuation account and part ownership of your family home.

The Commissioner is satisfied that your permanent place of abode is outside Australia.

Therefore, you are not a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for 183 days or more 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 the past income years. You will not be present in Australia for more than 183 days in the future income years. Therefore, 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 member on behalf of whom contributions are being made to 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 whole ruling period.