Edited version of private advice

Authorisation Number: 1052041092008

Date of advice: 7 October 2022

Ruling

Subject: Residency for tax purposes

Question

Will you remain an Australian resident for tax purposes after you relocate to Country A?

Answer

Yes

This ruling applies for the following periods:

Year ended XX June 20XX

Year ended XX June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Individual 1 and Individual 2 were born in Australia and are Australian citizens.

Individual 1 and Individual 2 have 3 children who will remain in Australia for education purposes.

Individual 1 intends to accept a work contract in Country A, commencing in January 20XX, and will work there for at least 2 years, but up to 5 years depending on how Individual 1 and Individual 2 like the work and the country.

Individual 1 and Individual 2 intend to return to Australia after the work contract ends.

Individual 1 and Individual 2 will retain their family home in Australia in which 2 out of 3 of their children will continue to reside.

Individual 1 and Individual 2 will retain their household items, motor vehicles and small boat in Australia; the vehicles will remain parked in the garage of their family home.

Individual 1 and Individual 2 intend to rent a furnished home to live in for the duration of their stay in Country A.

Individual 1 and Individual 2 intend to financially support their 3 children here in Australia.

Individual 1 and Individual 2 intend to come back to Australia on a regular basis to visit family.

Individual 1 and Individual 2 will still have Australian bank accounts.

Neither Individual 1 or Individual 2 are members of a superannuation scheme established by deed under the Superannuation Act 1990 or eligible employees for the purposes of the Superannuation Act 1976

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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

•                    family and business/employment ties

•                    maintenance and location of assets, and

•                    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:

•                    Physical presence - You will spend the majority of your time in Country A for the relevant period

•                    Intention or purpose - Your intention is to reside in Country A temporarily.

•                    Employment ties - Individual 1 will take a work contract for a period of at least 2 years.

•                    Maintenance of assets - You have substantial assets in Australia that you will retain.

•                    Social and living arrangements - When in Country A you intend to live in a furnished rental property; you have an Australian mailing address and you will maintain your Australian bank accounts

You intend to be away from Australia temporarily and will not cut any ties to Australia.

Therefore, you are a resident of Australia under the resides test for the period of the 20XX and 20XX financial years.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are considered.

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

Individual 1 was born in Australia and his domicile of origin is Australia. He is not intending to change a domicile of choice to Country A as he only intends to live there temporarily. You are not entitled to live in Country A indefinitely.

Individual 2 was born in Australia and her domicile of origin is Australia. She is not intending to change a domicile of choice to Country A as she only intends to live there temporarily. You are not entitled to live in Country A indefinitely.

Therefore, your domicile will remain 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:

•                    Your intention is to reside in Country A temporarily to work on a short term contract.

•                    You own a property at X, which is your main residence until you temporarily moved to Country A.

•                    This property will be used by 2 of your 3 children and you will move back in after your return to Australia

•                    You still use this address on documents.

Although you are relocating to Country A for a period of time, you will not be definitely abandoning, in a permanent way, living in Australia.

Therefore, the Commissioner is not satisfied that your permanent place of abode will be outside Australia.

Therefore, you are 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

You will be present in Australia for 183 days or more during the 20XX income year and the Commissioner is not satisfied that your usual place of abode will be outside Australia for this year.

Therefore, you are a resident under this test for the 20XX income year.

You will not be present in Australia for 183 days or more during the 20XX income year.

Therefore, you will not be a resident under this test for the 20XX income year.

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

You satisfy at least one of the tests of residency and so are a resident of Australia for income tax purposes for the years ended 30 June 20XX and 30 June 20XX.