Edited version of private advice

Authorisation Number: 1051999479252

Date of advice: 1 July 2022

Ruling

Subject: International residency

Question

Are you an Australia resident for tax purposes from your departure from Australia until your return in approximately December 20XX?

Answer

Yes

This ruling applies for the following periods:

Year ending 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 A.

You have dual citizenship in Australia and Country A as one parent was born in Australia.

You moved to Australia as a teenager and have lived here ever since.

You have started a Master's Degree, fulltime, in Country B.

You flew out of Australia on XX December 20XX. You intend on returning to Australia after graduation.

The Department of Home Affairs granted permission to leave Australia due to your studies, and advised you that due to COVID you would not be allowed to return within four months of your departure.

You bought a one way plane ticket. It made more sense due to the COVID pandemic, flight cancellations, and airlines going out of business, and the fact that the Master's Degree will take two years to complete.

Up until recently, you were staying in accommodation with a short term lease, in Country B, where the university is located.

You then moved to Country A, and are currently staying with some family, while you complete your Thesis online.

You do not have a spouse or children.

You are registered in the commune in X (Country A) and the Department of Income to get an Identification Card for ease of travel and to get a Health Card as Medicare will only cover you for six months.

You are enrolled to vote in Australia. You advised the Australian Electoral Office of a temporary stop for the recent election, having remained enrolled until then.

You own a property in Australia that has been rented out for a number of years.

Prior to leaving Australia you were living and working in City A, and you plan on returning there at the completion of your studies.

Prior to leaving Australia, you were renting a property in City A.

You have some boxes of personal effects that are being stored at a friend's house while you are away.

You do not have an overseas bank account. You are still using your Commonwealth Travel Card and NAB bank account.

You have an Australian International Licence.

You do not have a foreign driver's licence.

You do not own any investments overseas.

You were employed by the Commonwealth Government of Australia for 20 years. You are a member of various Super Funds. You are not presently contributing to the funds.

You continue to be a member of a voluntary organisation. You worked for the for a short period online while overseas.

You do not have any other income from an Australian or foreign source other than the rental income from your Australian property and your work for the voluntary organisation.

You have a home loan for the Australian property with an Australian bank.

The majority of your family and friends are in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(1)

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

Detailed reasoning

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,
• the domicile test,
• the 183 day test, and
• the superannuation test.

The primary test for deciding the residency status of an individual is whether they reside 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 resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679).

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.

Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

• Physical presence
• Intention or purpose of presence
• Family and business/employment ties
• Maintenance and location of assets, and
• Social and living arrangements.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia (IT 2650) and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

We consider that your circumstances are consistent with you residing in Australia.

This is because:

• Your intention is to remain overseas just long enough to complete your studies, and then you will be returning to live in Australia.
• Whilst in Country B you lived in temporary accommodation and have only recently moved in with some overseas relatives.
• You are still a member of a voluntary organisation and have continued to do some work online while overseas.
• You have substantial assets in Australia including a house and your bank accounts.
• The majority of your friends and family remain in Australia.
• You have not cut ties to Australia.

You are a resident of Australia under the resides 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 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 parent at the time of your birth) unless you have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must 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.

In your case, you were born in Country A and your domicile of origin is Country A, however you have dual citizenship in Australia and Country A as your parent was born here. You immigrated to Australia when you were a teenager and have lived here ever since.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia, as you are a citizen of Australia and have made your home here indefinitely.

You have also stated that after completing your studies in Country B, it is your intention to return to your life in Australia. It is considered that you have not abandoned your domicile of choice in Australia. 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 courts have held that the phrase 'permanent place of abode' calls for a consideration of the town or country where a person is located. 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 his or her permanent place of abode outside Australia are:

(a)  whether the taxpayer has definitely abandoned, in a permanent way, living in Australia; and

(b)  whether the taxpayer is living permanently in a specific country.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

(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.

The Commissioner is not satisfied that your permanent place of abode is outside Australia. This takes into account that:

• You only intend to stay overseas for a specified period of two years, with the purpose of completing a master's degree.
• You have a firm plan to return to Australia at the completion of your studies overseas
• You did not establish a home outside of Australia, instead staying in accommodation with a short term lease, and then recently moving in to stay with some family overseas.
• You continue to own a property in Australia for which you are still making repayments on a home loan with an Australian Bank

•         You have a strong durability of association with Australia, with the majority of your family and friends remaining here, an ongoing association with the voluntary organisation, the continuing contribution to the home loan repayments for your property in Australia and the ongoing maintenance of Australian bank accounts.

You are a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You have not/will not be present in Australia for 183 days or more during the relevant income years.

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.

You are not a contributing member of 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

You satisfy the 'resides' test and the domicile test of residency and so are a resident of Australia for income tax purposes for the period from your departure until your return to Australia at the completion of your studies and graduation.