Edited version of private advice

Authorisation Number: 1052129624960

Date of advice: 28 June 2023

Ruling

Subject: Residency

Question

Are you an Australian resident for tax purposes once you departed Australia on DDMM20XX?

Answer

No.

This ruling applies for the following periods:

For the year ended 30 June 20XX

For the year ended 30 June 20XX

For the year ended 30 June 20XX

For the year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia in 19XX and are an Australian citizen.

Your spouse is a citizen of an overseas country (Country B).

On DDMM20XX you departed Australia with your spouse and first child to live in Country B.

You lived with your spouse's parents for a period of X to be closer to the Country B family while your first child was still young.

While living overseas in Country B, your Australian family home has been continuously rented under a non-arm's length agreement since DDMM20XX. The current rental lease will expire soon.

You and your spouse conceived more children while living in Country B.

From MM20XX you and your spouse leased your own rental property in Country B on ongoing basis.

Your children are citizens of Country B however your first child was born in Australia before you departed in 20XX and is an Australian citizen.

You studied a part time post graduate degree at a Country B university for X years from MM20XX to MM20XX.

You are currently a tax resident of Country B having been there for more than 183 days.

Your visa in Country B allows you to live and work there due to your spouse's Country B family descent.

While living in Country B you received income from X where you worked in the position of X on contract as a X.

You hold an ownership interest in your business in Australia and you are currently performing some functions remotely from Country B.

You do have a position in the business remaining for you when you return to Australia which has two locations in different suburbs. You are looking to purchase another business which also located in Australia.

You hold a Driver's' licence in Country B

You attend a gym while living in Country B.

You do not own any assets outside of Australia such as bank accounts, investments or real property.

You advised us that you may be eligible to apply for citizenship in Country B after living there for a conditional period of time.

You travelled back to Australia on DDMM20XX to visit family and friends for 35 days and you have since departed Australia again on DDMM20XX.

You are planning to enrol your children into childcare/education facilities when you return to Australia permanently, sometime during 20XX and when your spouse is agreeable to travel.

You started to plan your permanent return to Australia, on your recent visit in MM20XX however your intention at that time was not to return here to reside. Your spouse and children remained in Country B and did not travel to visit Australia with you.

Other contributing factors for your delay in returning were due to COVID-19 international border closures and then your spouse becoming pregnant. Staying longer overseas in Country B also meant you were personally able to provide family stability for your spouse and children.

In Australia you own the following assets:

•         2 properties.

•         50% ownership interest in your Australian company, and

•         1 Australian share held within your Australian trust.

Your personal possessions and effects are currently kept in paid storage in Australia.

While living in Country B your Australian mail is currently sent to your rental property and your parent's address.

You advised your Australian financial institution/s with whom you have investments with that you are a foreign resident for tax purposes so that non-resident withholding tax can be deducted on any interest income you received.

You did not advise the Australian Electoral Commission or Medicare that you departed Australia in 20XX.

You have a current Australian private health insurance policy however you did not inform them that you departed Australia in 20XX.

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

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Summary

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for tax purposes from DDMM20XX.

Detailed reasoning

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 TR 2023/1 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 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 have taken the following into consideration when determining whether you meet the resides test.

•         On DDMM20XX you departed Australia with your spouse and first child to live in Country B.

•         While living overseas in Country B, your Australian family home has been continuously rented under a non-arm's length agreement since DDMM20XX.

•         Your personal possessions and effects are currently kept in paid storage in Australia.

•         Initially you lived with your spouse's parents for the first X years, however from MM20XX you and your spouse leased your own rental property in Country B on an ongoing basis

•         You studied a part time post graduate degree at a Country B university for X years from MM20XX to MM20XX.

•         You travelled back to Australia on DDMM20XX to visit family and friends for 35 days and you have since returned to Country B on DDMM20XX.

•         You started to plan your permanent return to Australia, on your recent visit in MM20XX however your intention at that time was not to return here to reside. Your spouse and children remained in Country B and did not travel with you to Australia.

•         You are currently a tax resident of Country B having been there for more than 183 days.

•         You advised your Australian financial institution/s with whom you have investments with that you are a foreign resident for tax purposes so that non-resident withholding tax can be deducted on any interest income you received.

•         Your visa in Country B allows you to live and work there due to your spouse's Country B family descent.

•         While living in Country B you received income from X where you worked in the position of X on contract in the position of X.

•         You hold a Driver's' licence in Country B

•         You attend a gym while living in Country B.

You are not a resident of Australia under the resides test for the periods from DDMM20XX.

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

In your case, you were born in Australia and your domicile of origin is Australia.

Based on the facts and circumstances provided in this private ruling, it is considered that you have not abandoned your domicile of origin (Australia) and acquired a domicile of choice overseas. You advised us that you may be eligible to apply for citizenship in Country B after living there for a conditional period of time.

You currently remain a citizen of Australia.

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 (Harding) 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:

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

•         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;

•         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;

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

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

•         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

As mentioned above in relation to the Harding case, one of the two key considerations in determining whether a taxpayer has their permanent place of abode outside Australia is whether the taxpayer has 'definitely abandoned, in a permanent way, living in Australia'.

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

•         On DDMM20XX you departed Australia with your spouse and first child to live in Country B.

•         You are currently a tax resident of Country B having been there for more than 183 days.

•         You advised your Australian financial institution/s with whom you have investments with that you are a foreign resident for tax purposes so that non-resident withholding tax can be deducted on any interest income you received.

•         While living overseas in Country B, your Australian family home has been continuously rented under a non-arm's length agreement since DDMM20XX.

•         Your personal possessions and effects are currently kept in paid storage in Australia.

•         Initially you lived with your spouse's parents for the first X years, however from MM20XX you and your spouse leased your own rental property in Country B on an ongoing basis

•         Your visa in Country B allows you to live and work there due to your spouse's Country B family descent.

•         You advised us that you may be eligible to apply for citizenship in Country B after living there for a conditional period of time.

The Commissioner is satisfied that your permanent place of abode is outside Australia from DDMM20XX.

Therefore, you are not a resident of Australia under the domicile test from DDMM20XX.

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 have not been present in Australia for 183 days or more during the income years ended 30 June 20XX, 20XX, and 20XX.

Therefore, you are not a resident under the 183-day test for 20XX, 20XX and 20XX.

However, you were present in Australia for 183 days or more in the income year ended 30 June 20XX. Therefore, you will be a resident under this test for 20XX unless the Commissioner is satisfied that your usual place of abode was outside Australia, and you do not have an intention to take up residence in Australia.

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 in Australia for the income year ended 30 June 20XX:

•         You were living in your family home in Australia in a permanent way prior to your Australian departure.

•         You first departed Australia for Country B on DDMM20XX.

•         Initially you lived with your spouse's parents for the first XX years, however from MM20XX you and your spouse leased your own rental property on an ongoing basis in Country B

•         While living overseas your Australian family home has been continuously rented since DDMM20XX.

•         Your personal possessions and effects are currently kept in paid storage in Australia.

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia from DDMM20YY.

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

While your stated intention was to return to Australia, this did not occur during the ruling period. In forming the relevant state of satisfaction, the Commissioner has to take into account not only stated intention but also the objective facts. The objective facts including your physical presence, your family being with you in Country B and your reduced connection to Australia during the relevant period mean that the Commissioner cannot be satisfied that you did intend to take up residence.

The Commissioner is not satisfied that you did intend to take up residency in Australia following your departure on DDMM20XX.

Based on the information provided, you are not a resident under this test.

Based on your circumstances, the Commissioner is satisfied that you did have your residence in Australia for the 20XX income year under this test. Your usual place of abode was Australia and are an Australian citizen by birth.

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 from DDMM20XX. For more information on amending tax returns after you have already lodged, go to ato.gov.au and search for quick code QC 33887.