Edited version of private advice

Authorisation Number: 1051995007803

Date of advice: 17 June 2022

Ruling

Subject: Residency

Question 1

Did you cease to be an Australian resident during the year ended 30 June 20XX after you relocated overseas?

Answer

Yes.

Question 2

Will you be a foreign resident for the balance of the 20XX income year and the entirety of the 20XX income year?

Answer

Yes.

This ruling applies for the following periods:

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 A.

You became a country B citizen and then some years later became an Australian citizen.

You left Australia during the year ended 30 June 20XX to go to Country B.

You plan on living there permanently.

You will be a tax resident of Country B for the Country B 20XX tax year and thereafter.

You own an apartment in Country B which you plan on occupying for the foreseeable future.

Prior to departure, you:

•         Sold your car in Australia and bought a car in Country B

•         Shipped furniture, clothes, files, artwork and other personal effects to the apartment you own in Country B

•         Terminated your Australian gym membership

•         Disconnected your internet connection

•         Cancelled your subscription services or moved them to Country B

•         Opened bank accounts in Country B with 2 financial institutions

•         Acquired an American Express card in Country B

•         Gave notice to the Australian Electoral Commission to be removed from the Electoral Role

You will retain one Australia bank account and a related credit card.

You are now enrolled to vote in Country B.

You have no spouse, partner or children under the age of 18 in Australia.

You have two adult children who currently remain in Australia, but one of them plans to move to Continent A at the end of 20XX when they graduate from university.

You children's mother, your former spouse, now also lives in Continent A.

You parents are moving into a retirement village in Australia, and you plan on visiting them periodically.

You retired from full-time employment in 20XX.

You are on the board of several companies in both Australia and Country B.

You remain a beneficiary of a family trust, together with your two adult children.

You remain a member of a self-managed super fund.

You anticipate you will be in Australia periodically for no more than 100 days in the 20XX financial year, due to board commitments and a desire to see your parents and children.

When you are in Australia you intend on staying at hotels and other similar accommodation.

You will undertake some work and charitable/community activity in Australia because of relevant directorships and you have access to office space leased to a company owned by the related family trust for that purpose.

You are retaining some illiquid residual investments that you directly hold.

You own a house in Australia which was your home prior to moving to Country B.

This house will be renovated over the next 18 to 24 months.

You have no plans to reoccupy the home and you have not yet determined what will be done with the home after renovations are completed - you may rent it out, leave it vacant or sell it.

You receive income from a rental property in Country C which you purchased in during the 20XX income year.

You receive income from board fees and dividends from share investments.

You have advised financial institutions etc. that they should deduct withholding tax.

You have taken out private health insurance in Country B and plan to let your Australian private health insurance lapse once your tax residency status is confirmed.

You are not a member of the public sector super scheme or an eligible employee under the CSS.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

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 during the year ended 30 June 2022 to relocate to Country B

•         You live in an apartment you own in Country B

•         You have your personal effects with you Country B

•         You have no intention of returning to Australia to live

•         You will only return to Australia for 100 days per year to visit your parents and fulfil board commitments.

You are not a resident of Australia under the resides test from the date you left Australia during the 20XX income year 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 Country A, were given Country B citizenship and became an Australian citizen many years ago.

It is considered that you acquired a domicile of choice in Australia on or after obtaining Australian citizenship.

Although you retained your Country B citizenship and now intend to live in Country B permanently, the Commissioner is currently unable to determine on what date you may acquire a domicile of choice in Country B.

Therefore, for the purposes of this private ruling, 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 during the year ended 30 June 20XX and relocated to Country B

•         You live in an apartment you own in Country B

•         You have no intention of returning to Australia to live

•         You shipped your personal effects to your home in Country B

•         You sold your car in Australia and bought a car in Country B

•         You have taken out private health insurance in Country B and will let your Australian insurance lapse

•         You removed yourself from the Australian electoral role.

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 have been 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 left Australia during the year ended 30 June 2022 and relocated to Country B with no intention of returning to Australia to live

•         You live in an apartment you own in Country B

•         You have your personal effects to your home in Country B

•         You have a car in Country B

•         Your movement and habits will be consistent with having a settled routine in Country B.

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia from the date you left Australia during the 20XX income year.

20XX Income Year

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 years ended 30 June 20XX and 20XX.