Edited version of private advice

Authorisation Number: 1052021683663

Date of advice: 9 September 2022

Ruling

Subject: Residency

Question

Did you cease to be an Australian resident for taxation purposes in July 20XX?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

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

Country X is your country of origin.

You are an Australian citizen.

You relocated from Australia to Country Y in July 20XX.

You commenced a permanent employment position with a company in Country Y in July 20XX.

You are also a director of this company.

You are a tax resident of Country Y.

Your employer issued you with a Country Y residency and work visa.

Your visa has been granted until 20XX and you intend to renew the visa in 20XX.

When you left Australia in July 20XX you intended to reside in Country Y indefinitely.

Since living in Country Y, you have entered into a long-term rental agreement. You are the sole occupant of the property, and your personal belongings are stored there.

You made several international trips from July 20XX.

You travelled to Australia in December 20XX to arrange to sell your property.

You returned to Country Y in January 20XX.

You visited your family in Country Z in February 20XX due to Covid-19 complications in Country Y.

You travelled to Australia in April 20XX due to Covid-19 border closures in Country Y.

You also needed to renew your Country Y visa whilst you were in Australia.

Renewing your Country Y visa took considerable time due to strict policies surrounding Covid-19.

You stayed with your former spouse whilst you were in Australia.

You did not work whilst you were in Australia.

You sold your Australian property in May 20XX.

Your Country Y visa was granted in September 20XX.

You returned to Country Y in October 20XX which was the first available opportunity for you to leave Australia.

You separated from your former spouse whilst you were in Country Y.

You travelled to Australia in February 20XX to renew your Country Y visa and to relocate some of your belongings that were stored at your former spouse's house.

You needed to relocate these belongings to your parents' house in a different state in Australia and organised a removalist company to deliver them in March 20XX.

Due to inclement weather conditions in one state, your belongings were not able to be delivered until April 20XX.

Your Country Y visa was due to expire in April 20XX.

You were not able to find a flight to return to Country Y and renew your visa in time after completing mandatory quarantine.

You decided to remain in Australia and apply for your Country Y visa there.

Renewing your Country Y visa took considerable time again due to strict policies surrounding Covid-19.

Your Country Y visa was granted in May 20XX.

In May 20XX you tested positive to Covid-19.

You attempted to book a flight to Country Y after recovering from Covid-19 however a one-way economy flight was expensive.

You booked a more affordable plane ticket to leave Australia in July 20XX.

You departed Australia for Country Y in July 20XX.

You do not have any dependants.

You informed all relevant Australian financial institutions of your relocation to Country Y.

You have informed the Australian Electoral Commission that you have resided in Country Y from 20XX.

You have informed Medicare that you have resided in Country Y from 20XX.

When completing incoming and outgoing passenger cards, you state your address in Country Y.

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

You participate in local community events and sports in Country Y.

You have a driver's licence in Country Z, Country A and Australia.

You have international health cover.

You have a bank account in Country Y.

You also have bank accounts in Country Z and Australia.

The only other asset you have in Australia is your superannuation account.

You receive your mail at your address in Country Y.

You are not a Commonwealth of Australia Government employee for superannuation (super) purposes.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You intend to continue living and working in Country Y for the foreseeable future and also intend to apply for permanent residency.

You entered into a new relationship prior to your recent trip to Australia and your partner will soon move to Country Y and live with you.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

Question

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 not consistent with you residing in Australia.

This is because:

•                    You have been predominately living in Country Y since 20XX.

•                    You work for a company that is based in Country Y.

•                    You are also a director of this company.

•                    You hold a residency permit in Country Y.

•                    You have continued to rent an apartment in Country Y.

•                    You no longer own property in Australia.

•                     You were unable to return to Country Y permanently due to Covid-19 complications.

You are not a resident under this 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 father 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 X and your domicile of origin is Country X. You immigrated to Australia and became an Australian citizen. Your domicile then changed from your country of origin, Country X to your domicile of choice, Australia.

It is considered that you have not abandoned your domicile of choice in Australia and acquired a domicile of choice in Country Y. You are not entitled to reside in Country Y indefinitely as you only hold a residency permit which expires in 20XX.

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.

a)    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:

b)    the intended and actual length of the taxpayer's stay in the overseas country;

c)    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;

d)    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;

e)    whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

f)     the duration and continuity of the taxpayer's presence in the overseas country; and

g)    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 satisfied that your permanent place of abode is outside Australia. This takes into account that you have been predominately living in Country Y since 20XX, you are renting an apartment in Country Y, your company is based in Country Y, and you only returned to Australia for an extended period due to Covid-19.

Therefore, you are not a resident of Australia under this 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 been 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

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, 20XX, 20XX and the years ending 30 June 20XX, 20XX and 20XX.