Edited version of private advice

Authorisation Number: 1051992448742

Date of advice: 13 June 2022

Ruling

Subject: Residency

Question

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

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

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 Country B.

You relocated to Australia in 20XX and became an Australian citizen in 20XX.

You were offered a position in Company A in Country A during the 20XX income year.

You terminated your job with Company B during the 20XX income year and signed a permanent, ongoing work contract with Company A.

Your immediate family is you, your spouse and one child.

You and your spouse decided it was an excellent opportunity for your family to relocate to live permanently in Country A and for your child to complete a tertiary degree in Country A provided they completed their studies in Australia at a school with international orientation.

Other reasons for you and your family wanting to move back to Continent A were:

•         You and your spouse's ageing parents

•         Easier way for both you and your spouse to maintain relationships with siblings and children who are in Continent A.

Your long term plan was to move to Country A and establish yourself and then your spouse and child would move to Country A following your child's school graduation in late 20XX.

This provided your child time to learn enough of one of the official local languages before starting university in Country A.

Prior to leaving Australia you terminated your position as a board director with a non-for-profit organisation which offers a wide range of social services.

Before departing Australia you cancelled your voting registration with the Australian Electoral Commission, your private health insurance your membership with a Country B community club and your membership with sport and leisure facilities.

You notified your superannuation fund of your departure.

You arrived in Country A during the 20XX income year and immediately obtained a work permit.

The permit you obtained is valid for 5 years with an automatic extension of another 5 years if employment continues.

You intend on applying for citizenship/permanent residency in Country A.

You started work in Country A with your new employer shortly after your arrival.

During the 20XX income year, you secured leased accommodation.

You moved into the leased apartment and have been living there since.

You purchased a car in Country A which you own outright and continue to maintain.

By the middle of March 2020 the first full COVID-19 pandemic lockdown had started.

The pandemic situation in Australian worsened and the Australian Government imposed a total travel ban.

You and your spouse accepted the risks of living separated for an extended period of time but did not want to change the overall direction of your plan which was to permanently relocate to Country A.

In late 20XX, your child completed year 12 schooling and, due to the pandemic and travel bans, started university in Australia with plans to move to Country A when first practical.

The Australian travel ban persisted for most of 2021.

You have not yet travelled back to Australia.

Your wife was able to obtain a travel exemption and travelled to Country A during 20XX.

You decided to stick to the long term plan of permanent relocation to Country A but also decided that in the meantime your spouse and child would visit Country A in the middle of 20XX.

Bookings have been made for them to visit.

The purpose of their visit is to evaluate prospective universities for your child to continue their tertiary education as they will eventually complete their master's degree in Country A.

You spouse and child will then move to Country A to be with you when it is practical for your child to continue her tertiary education in a local university.

You may return to Australia to attend arrangements with your property investments and family home; however, this will be a short stay due to your work obligations and lack of possibility to work remotely from Australia.

Since moving to Country A, you have retained the same job, residential accommodation and car.

You have also acquired recreational equipment: complete ski set, mountain e-bike.

All your belongings are located with you in Country A.

Since moving to Country A your intention was that the move was permanent, and you have no intention to move back to live in Australia.

When you left Australia, you completed the outgoing passenger card as Australian resident departing permanently.

You and your spouse jointly own the family home where your spouse and child reside.

You and your spouse jointly own two investment residential units which are rented to third parties.

You do not financially support your spouse or child - you only contribute to your mortgage obligations for both the family home and investment properties.

You have joint back accounts which form part of the loans for the properties you own.

You have an Australian bank account, offset account and transactions account, and Australian shares.

You have a local Country A bank account for receiving your salary and usual transactions.

You are not a member 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 A

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

•         You have employment in Country A

•         You have leased accommodation in Country A

•         You spouse and child remain in Australia, but they are financially independent and will join you in Country A when it is practical for your child to continue tertiary education in Country A

•         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

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 B and your domicile of origin is Country B. You immigrated to Australia in January 20XX and became an Australian citizen in 20XX.

It is considered that you abandoned your domicile of origin in Country B and acquired a domicile of choice in Australia. You were not entitled to reside in Country A indefinitely and while living in Country A, you only hold a work permit which is valid for five years.

Therefore, your domicile is still 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 left Australia to relocate to Country A

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

•         You have employment in Country A

•         You have leased accommodation in Country A

•         You spouse and child remain in Australia, but they are financially independent and will join you in Country A when it is practical for your child to continue tertiary education in Country A

•         You have cancelled your private health insurance

•         You have informed your superannuation fund and the Australian Electoral Commission of your relocation to Country A

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

20XX Income year

You were in Australia for 183 days or more in the 20XX income year. Therefore, you will be a resident under this test unless the Commissioner is satisfied that your usual place of abode was outside Australia and you do not have an intention to take up residence in Australia.

Usual place of abode

In the context of the 183-day test, a person's usual place of abode is the place they usually live, and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836.

Application to your situation

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

•         You have not returned to Australia since moving to Country A

•         You stay in rented accommodation in Country A

•         You have employment in Australia

•         You belongings are with you in Country A and you have acquired recreation equipment in Country A

•         Your movement and habits were consistent with having a settled routine in Country A

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia for the 20XX income year and you are not a resident under this test.

20XX, 20XX & 20XX Income years

You have not been present in Australia for 183 days or more during the 20XX, 20XX and 20XX income years.

Therefore, you are not a resident under this test for the 20XX, 20XX and 20XX income years.

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, 20XX, 20XX and 20XX.