Edited version of private advice

Authorisation Number: 1052134523558

Date of advice: 29 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

The scheme commenced on:

DDMM20XX

Relevant facts and circumstances

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

You departed Australia on DDMM20XX and since MM20XX you and your spouse have lived together in long term leased accommodation as your permanent residence in a foreign country (Country B).

Your work visa to enter Country B was initially sponsored by your first employer in Country B, where you were employed until DDMM20YY.

Since DDMM20XX you have been employed on a full-time ongoing basis with your current employer (your employer) in Country B, and since then you also obtained a higher position within their business.

Your employer renews your working visa annually near the expiry date and completes the necessary documentation with Country B immigration on your behalf.

You work regular business hours from an office located in Country B, however you do travel via air for work purposes to other locations to inspect work sites and inventory/assets for potential purchase by your employer.

You have not travelled back to Australia to visit family or friends since your departure.

You have no intention of moving back to Australia due to lack of job prospects.

On two occasions you initiated a permanent residency application in Country B, and you are aiming to finalise this process completely with immigration authorities next month.

You lodge tax returns in the foreign tax jurisdiction and are up to date with your lodgment and payment obligations.

You cancelled your Australian driver's licence one year after your departure and you now hold a valid Country B driver's licence.

You did not maintain or develop any new significant professional, social or sporting connections in either Australia or Country B since your departure.

You informed the Australian Electoral Commission and Medicare that you were departing.

You advised your Australian private health insurance provider to have your policy cancelled after your departure.

You sold your Australian home prior to your departure.

Immediately before leaving you were living at your parent's residence.

Your personal possessions and household effects were sold prior to your departure.

Your Australian motor vehicle was sold after your departure.

You own a machinery asset in Australia

You still have an Australian superannuation account with an industry fund however there have been no recent employer or employee contributions.

In Country B you have a bank account, household furniture and you lease a motor vehicle in your name.

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

Reasons for decision

Summary

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for tax purposes from 14 August 2020.

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:

•         You departed Australia on DDMM20XX and since MM20XX you and your spouse have lived together in long term leased accommodation as your permanent residence in a foreign country (Country B).

•         You sold your Australian home prior to your departure.

•         You have not travelled back to Australia to visit family or friends since your departure.

•         You have no intention of moving back to Australia due to lack of job prospects.

•         On two occasions you initiated a permanent residency application in Country B, and you are aiming to finalise this process completely with immigration authorities next month.

•         You cancelled your Australian driver's licence one year after your departure and you now hold a valid Country B driver's licence.

•         You did not maintain or develop any new significant professional, social or sporting connections in either Australia or Country B since your departure.

•         You informed the Australian Electoral Commission and Medicare that you were departing.

•         You advised your Australian private health insurance provider to have your policy cancelled after your departure.

•         Your personal possessions and household effects were sold prior to your departure.

•         Your Australian motor vehicle was sold after your departure.

•         You own a machinery asset in Australia

•         You still have an Australian superannuation account with an industry fund however there have been no recent employer or employee contributions.

•         In Country B you have a bank account, household furniture and you lease a motor vehicle in your name.

You are not a resident of Australia under the resides test from 14 August 2020.

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. On two occasions you initiated a permanent residency application in Country B, and you are aiming to finalise this process completely with immigration authorities next month.

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:

•         You sold your Australian home prior to your departure.

•         You departed Australia on DDMM20XX and since MM20XX you and your spouse have lived together in long term leased accommodation as your permanent residence in Country B.

•         You informed the Australian Electoral Commission and Medicare that you were departing.

•         You advised your Australian private health insurance provider to have your policy cancelled after your departure.

•         Your personal possessions and household effects were sold prior to your departure.

•         Your Australian motor vehicle was sold after your departure.

•         You have not travelled back to Australia to visit family or friends since your departure.

•         You have no intention of moving back to Australia due to lack of job prospects.

•         In Country B you have a bank account, household furniture and you lease a motor vehicle in your name.

•         Since DDMM20XX you have been employed on a full-time ongoing basis with your current employer (your employer) in Country B, and since then you also obtained a higher position within their business.

•         Your employer renews your working visa annually near the expiry date and completes the necessary documentation with Country B immigration on your behalf.

•         On two occasions you initiated a permanent residency application in Country B, and you are aiming to finalise this process completely with immigration authorities next month.

•         You lodge tax returns in the foreign tax jurisdiction and are up to date with your lodgment and payment obligations.

The Commissioner is satisfied that your permanent place of abode is outside Australia from 14 August 2020.

Therefore, you are not a resident of Australia under the domicile test from 14 August 2020.

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 2021 and 30 June 2022.

Therefore, you are not a resident under the 183-day test for 2021 and 2022.

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 14 August 2020.