Edited version of private advice

Authorisation Number: 1051990791297

Date of advice: 8 June 2022

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia. You are a citizen of Australia.

You had a visa that allowed you to enter Country A.

You left Australia in late 20XX to live in Country A and became a resident for tax purposes.

You beneficially own a property in Country A and Country B.

You also beneficially own a residential property in Country C.

You relocated to Country C to live there indefinitely.

You became a Country C tax resident. You also ceased to be a Country A tax resident.

The Country A visa expired. Instead of applying to extend the visa you applied for a Country C visa which was issued shortly after.

When your current visa expires you intend to apply for an "indefinite leave to remain" visa. If granted, this visa will allow you to remain in Country C indefinitely.

You established a business in Country A, but it did not flourish.

Your de facto partner will remain in Country A for the foreseeable future work reasons but will regularly join you in Country C.

Your de facto partner is a Country A citizen.

You do not own property in Australia.

Your personal possessions are in Country A and Country C.

When your Country A business did not flourish you then established a business in Country C. This business has grown to employ around XX staff.

Your Country C business has rented commercial premises locally.

For the foreseeable future, you expect to spend:

1.    At least 150 days in Country C at your residential property,

2.    Up to 60 days in Australia,

3.    Up to 60 days in Country B

4.    No more than 90 days in Country A, and

5.    The balance of days either in Country C or travelling elsewhere for private and business purposes.

You are employed by the business in Country C. This business is conducted through a local corporate group that is owned by a local discretionary trust set up by yourself.

You intend on returning to Australia as a visitor for periods not exceeding 60 days.

You do not intend to return to Australia to live.

You have removed your name from the Australian electoral roll.

Your parents and sibling remain in Australia.

You and your defacto partner are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

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 (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 234at 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 departed Australia on in late 20XX to live and work in Country A and then Country C

•         Your intention was to live and work overseas

•         You have beneficial ownership of a residential property in Country C

•         You established a business in Country C which employs around XX staff

•         You intend to apply for an "indefinite leave to remain" visa when your investor visa expires

•         You have no intention to return to Australia to live

You are not a resident of Australia under the resides test for the period 1 July 20XX to 30 June 20XX.

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 yet abandoned your domicile of origin in Australia and acquired a domicile of choice in Country C. This is because you have not yet applied for, nor been issued, a visa that will allow you to remain there indefinitely. You remain in Country C on a visa, but you intend to apply for indefinite leave to remain.

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 sold your residential property in Australia

•         Your defacto partner accompanied you to Country A and will visits you in Country C regularly

•         You only intend to visit Australia for periods of up to 60 days per year

•         You established a business in Country C which employs around XX people

•         You have rented considerable commercial premises in Country C

•         You beneficially own a residential property in Country C

•         You funded a discretionary trust since moving from Country A to Country C.

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 been present in Australia for 183 days or more during the 20XX income year. 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 year ended 30 June 20XX.