Edited version of private advice

Authorisation Number: 1052080946261

Date of advice: 14 February 2023

Ruling

Subject: Residency

Question

Did you cease to be tax resident of Australia at the time you relocated to Country A on XX October 20YY?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 20YY

Year ending 30 June 20YY

Year ending 30 June 20YY

The scheme commenced on:

XX October 20YY

Relevant facts and circumstances

You, your spouse and your children were born in Australia and are Australian citizens.

You, your spouse and your dependent children departed permanently from Australia on XX October 20YY to reside indefinitely in Country A.

Person 1 has obtained permanent employment and will carry out their employment from Country A.

You, your spouse and your children have obtained residence visas in Country A.

You have entered into a long-term lease agreement in Country A.

You took all your personal belongings to Country A.

Your children are enrolled and attending a school in Country A.

You do not intend on returning to Australia for the foreseeable future.

You have sold your former Australian main residence prior to your relocation to Country A.

You sold your motor vehicle prior to your relocation to Country A.

Your only assets in Australia, include some cash and superannuation.

You have advised your Australian banks that you have relocated to Country A.

You have deregistered from the Australian Electoral Roll.

You have cancelled your Australian private health insurance.

You have cancelled all Australian social and sporting memberships.

Detailed reasoning

Overview of the law

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 Draft Taxation Ruling TR 2022/D2 Income tax: residency tests for individuals.

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 217at 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 have taken the following into consideration when determining whether you meet the resides test:

•         You left Australia on XX October 20YY.

•         You do not intend to visit Australia in the foreseeable future and do not intend to spend any time in Australia.

•         You, your spouse and your three children have relocated to Country A permanently.

•         You, your spouse and your children have obtained Country A Resident Visas.

•         You have entered into a long-term lease agreement in Country A.

•         Your family personal effects were taken to Country A.

•         You will live, work and study in Country A.

•         The children will be attending school in Country A.

•         You have obtained permanent employment overseas and will carry out your employment from Country A.

•         Your only assets in Australia include some cash and superannuation.

•         You have advised your Australian banks you have relocated to Country A.

•         You have cancelled all Australian social and sporting memberships.

•         You have sold your Australian main residence and motor vehicle.

You are not residents of Australia under the resides test from XX October 20YY.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund 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 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

•         You, your spouse and your children were born in Australia and your domicile of origin is Australia.

•         You, your spouse and your children do not intend to apply for Country A citizenship or permanent residency.

•         You do not intend to return to Australia to live in the foreseeable future.

It is considered that you did not abandon your domicile of origin in Australia and acquire a domicile of choice in Country A. You are not entitled to reside in Country A indefinitely and while living in Country A, you only hold a residence visa which is valid until XX February 20YY.

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 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:

•         You intend to reside in Country A indefinitely and have no intention to return to Australia at this stage.

•         You and your spouse have relocated to Country A permanently with your dependent children.

•         You have a long-term lease in Country A.

•         You took all your personal belongings to Country A.

•         You, your spouse and your children have Country A Resident Visa's.

•         You will carry out your employment from Country A.

•         Your children are enrolled in a school in Country A.

•         You have sold your main residence and motor vehicle in Australia.

•         You have deregistered from the Australian Electoral Roll.

•         You have cancelled your Australian private health insurance.

•         You have cancelled all Australian social and sporting memberships.

The Commissioner is satisfied that your permanent place of abode is outside Australia.

Therefore, you are not residents 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

•         At all times throughout the ruling period, you, your spouse and your children's usual place of abode will be outside Australia.

•         At all times throughout the ruling period, you, your spouse and your children do not intend to take up residence in Australia.

•         At all times throughout the ruling period, you, your spouse and your children do not intend to visit Australia.

You do not intend to be present in Australia for 183 days or more during the 20YY, 20YY and 20YY income years. Therefore, you are not a resident under this test.

Usual place of abode

In the context of the 183-day test, a person's usual place of abode is the place they usually live and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836.

Application to your situation

We have taken the following into consideration when deciding whether your usual place of abode is outside of Australia:

•         You intend to reside in Country A indefinitely and have no intention to return to Australia at this stage.

•         You and your spouse have relocated to Country A permanently with your dependent children.

•         You have a long-term lease in Country A.

•         You took all your personal belongings to Country A.

•         You, your spouse and your children have Country A Resident Visa's.

•         You will carry out your employment from Country A.

•         Your children are enrolled in a school in Country A.

•         You have sold your main residence and motor vehicle in Australia.

•         You have deregistered from the Australian Electoral Roll.

•         You have cancelled your Australian private health.

•         You have cancelled all Australian social and sporting memberships.

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia for the relevant income years.

Intention to take up residency

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts. 'Intend to take up residency' does not merely mean intend to stay for a long time. It means intending to live here in such a manner that you would reside here.

Application to your situation

We have taken the following into consideration when deciding whether you intend to take up residence in Australia:

•         You intend to reside in Country A indefinitely and have no intention to return to Australia at this stage.

•         You have a long-term lease in Country A.

•         You, your spouse and your children have Country A Resident Visa's.

•         You will carry out your employment from Country A.

•         Your children are enrolled in a school in Country A.

•         You have sold your main residence and motor vehicle in Australia.

Based on your circumstances, the Commissioner is satisfied that you do not intend to take up residence in Australia for the relevant income years.

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

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 YY, 20YY and 20YY.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1