Edited version of private advice

Authorisation Number: 1052163822442

Date of advice: 5 September 2023

Ruling

Subject: Residency

Question 1

Are you an Australian resident for taxation purposes from Date 1 until Date 2?

Answer

Yes.

Question 2

Are you an Australian resident for taxation purposes under Article 4 of the Agreement between the Government of Australia and the Government of Australia and the Government of the Republic of Country E for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with respect to Taxes on Income (the DTA)?

Answer 2

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Your country of origin is Australia.

From Date 3 to Date 4, you worked in Country A in a residential role. Following completion of your employment in Country A, you returned to Australia for several months.

From Date 5 to Date 6, you worked in Country B. Following completion of your employment in Country B, you returned to Australia for several months.

From Date 7 to Date 8, you worked in Country C. Following completion of your employment in Country C, you returned to Australia.

From Date 9 to Date 10, you worked in Country D From Date 11 to Date 12, you worked in Country E.

From Date 12 to Date 13, you worked in Country F

Between Date 13 and Date 14, you worked both in Country F and Australia. You resided primarily in Australia during that time.

From Date 14 to Date 15, you worked in Australia.

During rotational breaks, you resided at Property A.

On Date 16, you were issued with a visa to enter Country E. You departed Australia for Country E on that date.

On Date 17, you were issued with a limited stay permit by Country E.

On Date 18, you were issued with a further limited stay permit by Country E. This visa allows you to stay permanently in Country E.

You intend to reside in Country E for the duration of your contract. You formed this intention once you accepted the residential contract of employment.

You have come back to Australia for the following period since initially departing Australia: ....:

• Arrived in Australia on Date 19 and departed on Date 20.

The purpose of the visit was to see your family.

During your visit you stayed for X nights in City A and X nights in City B. You stayed primarily with your family during the visit.

In Country E, you and your partner reside at the manager's residence in City C.

As part of your employment contract, you are entitled to a fully furnished housing facility. The residence has several bedrooms. You and your partner are entitled to full use of the residence for the duration of your contract. This use can be extended if your contract is extended.

You have the following in Country E:

•         household effects including barbecue, electrical appliances, kitchen and dining utensils, bedding and towels

•         bank account

•         Country E driving licence

•         Country E tax file reporting card.

You have the following in Australia:

•         household effects including furniture, electrical appliances, kitchen and dining utensils, bedding and towels

•         Property A

•         Property B

•         several bank accounts

•         superannuation account.

On leaving Australia, you left your household effects at Property A. You plan to reside at this property when you return to Australia.

Since leaving Australia, Property A has been occupied by your partner's parent for XXX days.

Your partner has also returned to Property A for a period of XXX days.

For several months, Property A was left vacant.

You are employed overseas by Company A. Your contract is XX years but can be extended indefinitely in XX-year increments.

You commenced working for Company A last year.

Your partner accompanied you overseas and is living with you there.

You have no sporting connections in Australia. You maintain social connections with family and friends.

In Australia, you have the following relatives:

•         a parent

•         siblings and their partners

•         several other extended family members

You participate in XXX sports in the country where you are living. You also have social connections with friends and work colleagues.

Neither you nor your partner are Commonwealth Government of Australia employees for superannuation purposes.

You have not asked the Australian Electoral Office to remove your name from the electoral roll.

You have not advised Australian companies who you have investments with that you are a foreign resident.

You have not advised Medicare to remove your name from their records.

You have not suspended or cancelled your private health insurance.

You have maintained your membership with a professional organisation relevant to your employment.

You have lodged an income tax return for the previous income year in Country E.

You have also lodged an income tax return for the year ending 30 June 20XX in Australia. In that return, you advised that you were an Australian resident for taxation purposes.

When you completed the Australian Immigration Outgoing passenger card, you wrote that your purpose for travelling was employment.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Issue - Residency

Question 1

Summary

You are an Australian resident for taxation purposes from Date one to Date two.

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 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:

•         Physical presence - You will reside in Country E for the entire period of the ruling, with the exception of short trips to visit family in Australia.

•         Intention or purpose - Your stated intention is to remain in Country E for the period of your employment contract which may be extended on completion of the initial period.

•         Behaviour - Your domicile is Australia and you do not have a permanent place of abode in another country. Nor have you changed your domicile of origin.

•         Family and business/employment ties - Your parent, siblings and their partners and several extended family members reside in Australia.

•         Maintenance and location of assets - You own XX properties in Australia. One of these is an investment property (Property B) and the other is where you primarily reside while in Australia (Property B). You have owned Property A for many years. Property A has been occupied by your partner's parent and by your partner for a time while you are working in Country E. You have kept most of your possessions at Property A.

•         You have several bank accounts and a superannuation account in Australia.

•         Social and living arrangements - You and your partner reside in the property in Country E supplied by your employer. You have retained social connections in Australia and have multiple family members who reside there.

•         You have retained your private health insurance and Medicare coverage and kept your name on the electoral roll.

We consider that for the period from Date one until Date two, you will not reside in Australia. Therefore, you are not a resident of Australia for this period under the resides test.

Domicile test

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 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 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.

Application to your situation

We have taken the following into consideration when deciding whether your domicile is Australia:

•         You were born in Australia and your domicile of origin is therefore Australia.

•         From XXXX, you have owned a property where you have primarily resided while you are in Australia

•         Your property is available to you at any time to return to

•         Although you have accommodation overseas, it is provided as part of your employment and once your employment ceases it is no longer available to you

Based on the facts and circumstances you have provided, you have not abandoned your domicile of origin (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] 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 have resided in Country E since Date 15 and intend to reside there until at least Date 21 when your employment contract is due to expire.

•         You may extend your employment contract but at this point in time you have not made a decision regarding any extension.

•         While in Country E, you reside in accommodation provided by your employer with your spouse. This accommodation is supplied on the proviso that you remain employed by your employer.

•         You have retained your place of abode in Australia, an investment property, assets including superannuation, health insurance and bank accounts, along with stored personal and household possessions.

•         You have retained social and family connections in Australia.

•         You have taken a short trip to Australia to visit family and friends since arriving in Country E. On your return to Australia, you primarily stayed with your family.

We accept that when you departed Australia, you had the intention to reside in Country E for the duration of your employment contract. However, the Commissioner is not satisfied that your permanent place of abode is outside Australia for the ruling period.

Based on the facts provided, we consider that your permanent place of abode is Australia. We consider that you have not abandoned Australia to your place of abode in Country E.

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 that 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.

Given you left Australia on Date 15, you were not present in Australia for 183 days or more during the income years ending 30 June 20XX and 30 June 20XX.

For the income year ending 30 June 20XX, you may still meet the 183-day test.

The Commonwealth Superannuation Fund 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 contributing member of 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 of Australia under this test.

Question 2

Summary

You are an Australian resident for taxation purposes under Article 4 of the Agreement between the Government of Australia and the Government of the Republic of Country E for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the DTA).

Detailed reasoning

It is possible to be a resident of more than one country at the same time for tax purposes in respect of an income year or part of an income year. If this is the case, the DTA will need to be considered when determining your liability to pay tax in Australia.

Article 4 of the DTA sets out the tiebreaker rules for individual residency. The purpose of the rules is to ensure that a taxpayer is only treated as a resident of one country for tax purposes. The rules have no effect on your domestic residency status.

If you are a resident in both Australia and Country E, Article 4 of the DTA provides that shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person.

Permanent home

Permanent home is not defined in the DTA. To aid in determining what a permanent home is, reference can be made to supplementary materials. The OECD commentary to the Model Tax Convention provides that in relation to a 'permanent home':

a. for a home to be permanent, an individual must have arranged and retained it for his or her permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be of short duration. The dwelling has to be available at all times continuously and not occasionally for the purposes of a stay, which owing to the reasons for it is necessarily of short duration (e.g. travel for pleasure, business travel, attending a course etc) For instance, a house owned by an individual cannot be considered to be available to that individual during a period when the house has been rented out and effectively handed over to an unrelated party so that the individual no longer has possession of the house and the possibility to stay there.

b. any form of home may be taken into account, including a house or apartment belonging to or rented by the individual and a rented furnished room.

It is viewed that you have a permanent home in Country E as well as Australia. Therefore, it is necessary to move onto the habitual abode test under Article 4.

Habitual abode

The OECD commentary provides that to determine a taxpayer's habitual abode, it is necessary to consider whether the individual lived habitually, in the sense of being customarily or usually present, in one of the two states but not in the other during a given period.

The test is not satisfied merely by determining in which of the two contracting states the individual has spent more days during the relevant period. (Davies, White and Steward JJ in Pike v Commissioner of Taxation [2020] FCAFC 158 at [29]).

The concept of habitual abode refers to the frequency, duration and regularity of stays that are part of the settled routine of an individual's life and are therefore more than transient. It is possible for an individual to have a habitual abode in two states where the individual was customarily or usually present in each State during the relevant period.

Application to your situation

It is clear that you have a habitual abode in Country E as you are spending the majority of time there during the period you are completing your employment contract, with one or two short visits to Australia. However, you will also maintain your property in Australia which can be accessed at any time and which you have returned to following your employment overseas and during rotational breaks while working within Australia. You therefore have a habitual abode in both Australia and Country E.

Therefore, we will consider your personal and economic ties under Article 4 as below:

Personal and economic ties (centre of vital interests)

The OECD commentary states that regard should be had to the taxpayer's family and social relations, their political, cultural or other activities, their place of business, the place from which they administer their property etc.

In Commissioner of Taxation v Pike [2020] FCAFC 158 (Pike), the Full Federal Court stated at paragraph 39 that:

39. First, no error is discernible in the approach of the primary judge in examining Mr Pike's personal and economic considerations. Each case must be fact specific. In some cases the personal and economic considerations may be so intertwined that they are not separate considerations, whereas in other cases, they may be quite separate and distinct matters. Further, and contrary to the New Zealand decision in FFF, the clause does not place greater weight on personal factors over economic factors. As the parties agreed, Art 4(3)(c) poses a composite test and in each case, it will be a matter of fact and degree as to whether a taxpayer's personal and economic relations, viewed as a whole, support ties closer to one contracting state over the other contracting state. The primary judge correctly looked at Mr Pike's overall circumstances and engaged in a balancing of the significance of those personal and economic considerations as supporting ties closer to one contracting state than the other.

Based on Pike, the Commissioner has to balance all personal and economic facts together with no greater weight being placed on personal acts.

Application to your situation

As you have a habitual abode in both countries, you will be deemed to be a resident only of the State with which your personal and economic ties are closer.

In your situation:

•         You were born in and are a citizen of Australia

•         You are in Country E for the purpose of fulfilling an employment contract, which you may extend

•         You do not have any significant assets in Country E with the majority of your assets located in Australia, such as your XX properties, bank accounts and your superannuation fund. You will also receive rental income from Australia while in Country E

•         You have significant family connections in Australia including your parent and XXX brothers and sisters-in-law

•         You have retained your social connections in Australia.

On balance, you are taken to be a resident of Australia for the purpose of the DTA as your personal and economic ties have greater significance and are closer to Australia.

Conclusion

We have concluded that the tiebreaker tests in Article 4 of the DTA apply so that you are deemed to be a resident only of Australia.