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Edited version of private advice
Authorisation Number: 1052130593770
Date of advice: 21 June 2023
Ruling
Subject: Residency
Question
Will you be a non-resident of Australia for taxation purposes from XX XXXX 20XX to the XX XXXX 20XX income year?
Answer
Yes.
This ruling applies for the following periods:
Year ending 20XX
Year ending 20XX
Year ending 20XX
The scheme commenced on:
XX XXXX 20XX.
Relevant facts and circumstances
You are Australian citizens and married to each other. Your country of origin is also Australia.
You departed Australia on XXXX 20XX and resided in several overseas countries, before relocating to COUNTRY A on XX XXXX 20XX.
Your intention is to reside in COUNTRY A permanently.
Since your relocation to the COUNTRY A, you intend to spend less than a month per financial year in Australia.
You both hold a COUNTRY A visa that allows you to reside and work in COUNTRY A. The visa was issued on XX XXXX 20XX and expires XX XXXX 20XX. You intend to apply for a visa extension and permanent residency or citizenship in COUNTRY A.
You jointly own several properties in Australia which are rented at arm's length under commercial rates. The properties were initially managed by a third-party real estate agency before a relative took over the management of the properties.
Prior to your relocation to COUNTRY A you operated a company in Australia as sole directors and shareholders.
Your business in Australia stopped receiving payments in XXXX 20XX and will be deregistered on XX XXXX 20XX. Payments made for services were paid in Australian dollars and this income went into a bank account, however this account was closed in XXXX 20XX.
You incorporated a second company in COUNTRY A and started actively conducting your business in COUNTRY A (taking on clients, providing services to clients and receiving payments for services) from XXXX 20XX. The currency paid to this business is Australian and another overseas currency. You also intend on receiving another type of overseas currency as well.
In COUNTRY A you have a membership relevant to your services, will be joining a business-related society and have opened bank accounts.
Apart from your company in COUNTRY A and personal bank accounts, you do not have any other assets in the COUNTRY A.
You jointly signed a rental agreement in COUNTRY A and brought all your personal and household effects with you to COUNTRY A.
Neither of you have a driver's licence in COUNTRY A, or intend on applying for one.
You maintain Australian bank accounts to maintain investments. All other bank accounts in Australia have been closed.
You informed Medicare, the Australian Electoral Commission, and your Australian banking institutions of your relocation to COUNTRY A.
You have cancelled your Australian private health insurance and sold your vehicles prior to relocation to COUNTRY A.
While you are in COUNTRY A you will not carry out employment or be paid from an Australian employer.
You are not a member of any social or sporting clubs in Australia.
You are not eligible to contribute to the PSS or the CSS Commonwealth super funds.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 6(1)
Reasons for decision
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 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:
• You departed Australia on XXXX 20XX and resided in several overseas countries, before relocating to COUNTRY A on XX XXXX 20XX. You intend to reside in COUNTRY A permanently and have not returned to Australia since your arrival in COUNTRY A.
• You intend to work in COUNTRY A, for your company, and do not intend on spending more than a month per financial year in Australia.
• You have a COUNTRY A visa that allows you to reside and work. The visa was issued on XX XXXX 20XX and expires XX XXXX 20XX. You intend to apply for a visa extension and permanent residency or citizenship in COUNTRY A.
• You do not have employment or business income in Australia apart from your company in Australia which will be deregistered on XX XXXX 20XX.
• In COUNTRY A you have gym memberships, will be joining a business-related society and have opened bank accounts.
• You signed a rental agreement in COUNTRY A and brought all your personal and household effects with you to COUNTRY A.
• You jointly own several properties in Australia which are rented out at arm's length under commercial rates.
Therefore, neither of you are a resident of Australia under the resides test for the period XX XXXX 20XX to XX XXXX 20XX.
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 both of your cases, you were born in Australia and your domicile of origin is Australia
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 hold only a visa which is valid until XX XXX 20XX.
Therefore, for each of you, 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 relocated COUNTRY A on XX XXXX 20XX and intend to reside permanently.Since your relocation to COUNTRY A, you intend to spend less than a month per financial year in Australia.
• You signed a rental agreement in COUNTRY A and brought all your personal and household effects with you to COUNTRY A.
• You informed Medicare, the Australian Electoral Commission, and your Australian banking institutions of your relocation to COUNTRY A.
• You incorporated a company in COUNTRY A and started actively conducting your business in COUNTRY A (taking on clients, providing services to clients and receiving payments for services) from XXXX 20XX.
• You have cancelled your Australian private health insurance and sold your vehicles prior to relocation to COUNTRY A.
• While you are in COUNTRY A you will not carry out employment or be paid from an Australian employer.
• You are not a member of any social or sporting clubs in Australia.
• In COUNTRY A you have gym memberships, will be joining a business-related society and have opened bank accounts.
The Commissioner is satisfied that your permanent place of abode is outside Australia.
Therefore, neither of 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
Neither of you have not been present in Australia for 183 days or more during the 20XX income year and will not be present in Australia for 183 days or more during the 20XX or 20XX income years. Therefore, each of you are not a resident under this test.
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
In both of your cases, 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, each of you are not a resident under this test.
Conclusion
As neither of you satisfy any of the four tests of residency, each of you are not a resident of Australia for income tax purposes from XX XXXX 20XX to XX XXXX 20XX.