Edited version of private advice

Authorisation Number: 1052045179608

Date of advice: 17 October 2022

Ruling

Subject: Resident for taxation purposes

Question

Were you a resident of Australia for taxation purposes on and from the date you arrived in Country A until the end of the ruling period under subsection 6(1) of the Income Tax Assessment Act 1936?

Answer

No

This ruling applies for the following period:

Income year ended 30 June 20XX.

The scheme commences on:

1 July 20XX.

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You completed your tertiary studies in Australia and accepted a position at Organisation X located overseas in Country A.

Prior to departing Australia, you lived in a rental property for more than a year. You sold your motor vehicle and large household items, with some personal items that you did not take to Country A being stored with relatives.

You departed Australia shortly after the commencement of the income year in the ruling period, arriving in Country A on Date 1.

Your stated reason for going overseas on your Australian Immigration Outgoing passenger card was employment.

You stayed in Airbnb accommodation from when you arrived in Country A for several weeks before moving into a leased accommodation for the rest of the ruling period.

You travelled to Country A on a visa that is valid for several years after the end of the ruling period, and if you wish to remain in Country A after it expires you will need to apply for a different visa.

You have not applied for permanent residency in Country A with your intention when you travelled there being to complete your employment and training with Organisation X and return to Australia, not to reside overseas permanently.

You do not have a return airline ticket to Australia.

Your employment at Organisation X is ongoing and valid while your visa was valid. The position is guaranteed until after the end of the ruling period, with a likelihood of renewal.

You have bank accounts and a credit card in Country A and participate in a local sporting competition and are involved in a social club.

You have no plans to return to Australia, anticipating residing in Country A for several years, after which you will consider the merits of continuing your employment in Country A compared to potential employment in Australia.

In Australia you have family members, a bank account, shares, and friends with whom you keep in regular contact.

You do not have any sporting connections, and do not have any employment being held for you, in Australia.

You travelled to Australia for several days during the ruling period to attend a wedding and to visit family and friends before returning to Country A.

You have not been a Commonwealth Government of Australia employee for superannuation purposes.

You advised the Australian Electoral Office that you were going overseas and elected to be enrolled as an overseas elector.

You did not advise Australian companies with whom you have investments, or Medicare, that you were going overseas.

You lodged a tax return in Country A during the ruling period.

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 A until the end of the ruling period. This is because in your situation:

•         Physical presence - You have been physically in Country A since you relocated there on Date 1 until the end of the ruling period. You returned to Australia for a short period during the ruling period of several days before returning to Country A

•         Intention or purpose - Your stated intention in travelling to Country A was to live and work there for several years, and then to consider whether you remain overseas or return to Australia. Until then you have no plans to return to Australia to live.

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

•         Family and business/employment ties - You have family in Australia. You were employed with Organisation X during the ruling which is anticipated to continue in future income years.

•         Maintenance and location of assets - You sold your motor vehicle and household effects prior to departing Australia, taking some of your personal items to Country A with other personal items being put into storage. You have a bank account and some shares in Australia. You have bank accounts and a credit card in Country A; and

•         Social and living arrangements - You lived in a rental property prior to leaving Australia and have friends in Australia with whom you keep in contact, otherwise you do not have any social connections with Australia. You lived in Airbnb accommodation for a short period after you arrived in Country A and then moved into leased accommodation where you lived for the rest of the ruling period. You play in a local sporting competition and are involved in a social club which demonstrates a routine and habit associated with living in Country A.

Therefore, from the date you arrived in and relocated to Country A 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, and are a citizen of, Australia. Therefore, your domicile of origin is Australia.

You obtained and maintained a visa that enabled you to stay in Country A during the ruling period so that you could work for Organisation X but have not chosen to migrate to Country A. In your situation, you have not abandoned your domicile in Australia, nor have you applied for, or been issued, a visa that would allow you to remain in Country A indefinitely.

Therefore, you would be viewed as being a resident of Australia under the domicile test during the period from when you arrived in and relocated to Country A until the end of the ruling period unless the Commissioner is satisfied you had established a permanent place of abode outside of Australia.

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

•         your intention was to indefinitely reside in Country A in line with your employment with Organisation X for some years, ending after the end of the ruing period, which could be extended for a further period after that time

•         you stayed in rental accommodation after you arrived in Country A

•         you integrated yourself socially in Country A

•         you returned to Australia for a short period during the ruling period before returning to your rental accommodation in Country A; and

•         you advised the Australian Electoral Office that you were going overseas.

Therefore, you are not a resident of Australia under this test for the period commencing when you arrived in and relocated to Country A until the 30 June 20XX.

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 A and had remained there for the whole of the ruing period, except for a short period when you visited Australia before returning to Country A.

The combined period in Australia prior to departing Australia to travel to Country A, and the short visit to Australia during the ruling period, was less than 183 days.

Therefore, you are not a resident under this test in the income year covered by the ruling period as you were not present in Australia for 183 days or more during 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 have not been 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 A until the end of the ruling period, and the Commissioner is satisfied you have established a permanent place of abode outside Australia in Country A 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 A until 30 June 20XX.