Edited version of private advice

Authorisation Number: 1051987846336

Date of advice: 27 May 2022

Ruling

Subject: Residency

Question

Will you cease to be a tax resident of Australia immediately following your relocation to Country B?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2022

Year ending 30 June 2023

Year ending 30 June 2024

Year ending 30 June 2025

The scheme commences on:

1 July 2021

Relevant facts and circumstances

You were born in Country A.

You are an Australian citizen.

You were employed overseas with Company A during the 2019, 2020, 2021 and 2022 income years.

Company A paid you into an Australian bank account.

You worked in Country B, Country C and Country D and spent limited days in Australia while employed by Company A.

You resigned from Company A during the 2022 income year.

Given the nature of your overseas assignments with Company A, you filed your Australian tax returns as a tax resident of Australia.

You were in Australia for approximately 80 days during the 2022 income year.

You relocated to Country B for the foreseeable future during the 2022 income year.

You are employed in Country B by Company B to manage a project on a permanent basis.

Your initial employment contract with Company B is for a period of 3 years, however the project you are managing is expected to be completed in late 2026.

You have the option to extend your employment contract to the end of the 2026.

You intend to extend the contract and remain employed by Company B in Country B until at least the end of 2026, however possibly for longer.

You have been granted a Residency Permit by the Country B.

Your Residency Permit will be renewed by you and your employer for the duration of your employment in Country B.

Your wife will receive a Residency Permit as your married partner.

Your wife has visited Country B to initiate the process to receive her Residency Permit.

You wife has scheduled her visa appointment in Country B and will be travelling to Country B on a family visa to receive her Residency Permit.

Your wife is employed in Australia and has cash savings available to her in Australia to access.

Your wife will remain living in Australia to take care of her elderly mother.

Your wife will likely relocate to Country B with you once she is no longer required to care for her elderly mother.

At this point, it is not expected that you will support your family financially given your wife's employment and savings in Australia.

You have 2 adult children (older than 21 years old) who will continue to study in Australia and visit you in Country B on a regular basis for short trips.

You intend to spend less than 2 weeks per year in Australia following your relocation to Country B.

You entered into a 2-year lease for rental accommodation in Country B.

You own four properties in Australia.

You have full ownership of Property A where your wife will reside to care for her elderly mother until she relocates to Country B.

You have full ownership of Property B which is rented permanently under a commercial rental agreement.

You and your wife each have 50% ownership of Property C which is rented permanently under a commercial rental agreement.

You and your wife each have 50% ownership of Property D which is rented permanently under a commercial rental agreement.

You have developed professional and work-related connections in Country B.

You have not maintained any professional, social or sporting connections in Australia.

You have Australian superannuation and some cash in an Australian bank account.

You have informed your Australian financial institutions of your relocation to Country B.

You have cancelled your Australian health insurance.

You have informed Medicare that you reside overseas.

You have informed the Australian Electoral Commission that you live overseas.

You and your spouse are not members of any Commonwealth Government Superannuation Scheme.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(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 left Australia and relocated to Country B

•                    You have no intention of returning to Australia for the foreseeable future

•                    You are employed in Country B

•                    You live at a property in Country B with a two-year lease agreement

•                    Your spouse remains in Australia as she is caring for her elderly mother but is financially independent and will likely join you in Country B once her caring duties cease

•                    You have no remaining professional, social or sporting connections in Australia

You are not a resident of Australia under the resides test for the period 1 July 2021 to 30 June 2025.

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 Country A and your domicile of origin is Country A. You immigrated to Australia and became an Australian citizen. It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia.

It is considered that you have not yet abandoned your domicile of choice in Australia as you are not entitled to reside in Country B indefinitely and while living in Country B, you will only hold a residency permit which is renewed annually.

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 left Australia and relocated to Country B

•                    You have no intention of returning to Australia for the foreseeable future

•                    You are employed in Country B

•                    You live at a property in Country B with a two-year lease agreement

•                    Your spouse is remaining in Australia as she is caring for her elderly mother but is financially independent and will likely relocate once her caring duties cease

•                    You have cancelled your Australia private health insurance

•                    You have informed Medicare, your Australian financial institutions and the Australian Electoral Commission of your relocation to Country B

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 will not be present in Australia for 183 days or more during the 2022, 2023, 2024 and 2025 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 the period 1 July 2021 to 30 June 2025.