Edited version of private advice

Authorisation Number: 1052038615640

Date of advice: 4 October 2022

Ruling

Subject: International - residency

Question:

Are you viewed as being a resident of Australia for taxation purposes from the time you arrived in Country X until the end of the ruling period under subsection 6(1) of the Income Tax Assessment Act 1936?

Answer:

No.

The Commissioner is satisfied that your permanent place of abode during this period was Country X from the date you arrived there.

This ruling applies for the following periods:

Income year ended 30 June 20XX.

Income year ending 30 June 20XX.

Income year ending 30 June 20XX.

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country A and are a citizen of Country A.

You were living in Country A before coming to Australia, becoming a resident of Australia for taxation purposes after your arrival.

You became a citizen of Australia, maintaining your Country A citizenship.

While you were in Australia you were employed by Company ABC, an Australian private company.

You departed Australian some years after your arrival to travel to Country X where you will reside indefinitely.

As a citizen of Country A, you are able to reside and work in Country X indefinitely due to the provisions for free movement of people in the region.

You have commenced activities to obtain Permanent Resident status in Country X.

You had continued your employment duties for Company ABC remotely from Country X. However, you have now resigned from your position with them, and your employment is scheduled to end during the ruling period.

You lived in rented accommodation in Country X after your arrival, currently having a long-term lease that can be extended.

You anticipate purchasing a residential property in Country X when you can afford it.

You participate is sporting activities in Country X and have a motor vehicle over there, being in the process of obtaining a drivers' licence. You had your personal belongings shipped there from Australia.

You have not returned to Australia since you departed.

You do not:

•         intend returning to Australia to live and may spend short periods in Australia per income year during the ruling period

•         have any family in Australia

•         have any accommodation available to you in Australia

•         have any social and/or religious connections in Australia.

You have the following in Australia:

•         a bank account

•         shares

•         a superannuation account; and

•         a drivers' licence

You have:

•         informed your Australian banks that you were residing overseas

•         been deregistered from the Australian Electoral Roll

•         informed Medicare that you were residing overseas.

You were not eligible to contribute the Public Service Superannuation Scheme or the Commonwealth 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

Resident of Australia for taxation purposes

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 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 consider that your circumstances are not consistent with residing in Australia from the time you arrived and relocated to Country X until the end of the ruling period. This is because in your situation:

•         Physical presence - You have been physically in Country X since you relocated there and continue to live there until the present time.

•         Intention or purpose - Your stated intention in travelling to Country X is to live and there indefinitely and you have commenced the process of becoming a permanent resident. You will not return to live in Australia during the ruling period, and it is anticipated any future travel to Australia will be for short periods of time in any income year included in the ruling period.

•         Behaviour - Your behaviour since being in Country X shows that you have settled there and reflects a degree of continuity, routine or habit that is consistent with relocating to Country X. Your behaviour supports your stated intention to live and work Country X.

•         Family and business/employment ties - You were able to continue working for Company ABC when you went to Country X, which will end during the ruling period. You do not have any family in Australia.

•         Maintenance and location of assets - Your personal items were shipped to Country X, and you have a motor vehicle located there. You are in the process of obtaining a drivers' licence in Country X. You have a bank account, a superannuation account, some shares and a drivers' licence in Australia; and

•         Social and living arrangements - You have lived in rental accommodation since your arrival in Country X, currently have a long-term lease that can be extended. You intend purchasing a property in Country X when you can fund it. You do not have any accommodation available to you in Australia. You engage in sporting activities in Country X. Your activities demonstrates a routine and habit associated with living in Country X.

Therefore, from the date you arrived in and relocated to Country X until the end of the ruling period you are viewed as being a non-resident of Australia for taxation purposes.

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.

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, such as 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

In your case, you were born in Country A and are a citizen of Country A. You came to Australia and obtained visas to enable you to stay here, becoming an Australian citizen while maintaining your Country A citizenship.

Based on the information provided the Commissioner is satisfied that your permanent place of abode from when you relocated to Country X until the end of the ruling period was outside Australia. This considers that:

•         you intend to indefinitely reside in Country X

•         you stayed in rental accommodation after you arrived in Country X, currently staying in a leased property which can be extended, and anticipate purchasing a property in Country X when you can afford it

•         you are integrating yourself socially in Country X; and

•         you will not return to Australia permanently during the ruling period and may come to Australia for short periods of time during the ruling period.

Therefore, you are not a resident of Australia under this test for the period commencing when you arrived in and relocated to Country X until the end of the ruling period.

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 departed Australia to travel to Country X and have been overseas from the date you departed and will continue to remain overseas until the end of the ruling period.

Therefore, you are not a resident under this test in any income year covered by the ruling period as you were not present, and will not be present, in Australia for 183 days or more during any of the income years covered by the ruling period.

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

In your situation, you do not satisfy any of the four tests of residency from the time you arrived and relocated to Country X until the end of the ruling period on 30 June 20XX, and the Commissioner is satisfied you have established a permanent place of abode outside Australia in Country X during that period.

Therefore, you are not a resident of Australia for income tax purposes for the period commencing when you arrived in and relocated to Country X until the end of the ruling period.