Edited version of private advice

Authorisation Number: 1052195143312

Date of advice: 24 November 2023

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes from Date two until 30 June 202X?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 202X

Year ending 30 June 202X

Year ending 30 June 202X

Year ending 30 June 202X

The scheme commenced on:

Date two

Relevant facts and circumstances

You were born in Country A and moved to Country B at a young age.

You are an Australian citizen and do not hold any other citizenships.

You have recently married your spouse Person A. They are an Australian citizen and do not hold any other citizenships.

You departed Australia for Country B on Date one.

You commenced full-time employment with Company A from Date two.

As part of your employment role previously you were predominantly required to oversee operations in Australia and Country C. However, due to an expansion of your employer's operations into Country D and Country E, you are increasingly required to spend more time travelling to these locations.

Moving to Country B will mean that you are in a more suitable time zone to support your global role and are able to quickly travel to different locations.

Your employment contract does not require you to be based specifically in Australia

You have resigned from your director positions with the Australian arm of your employer but will remain as director of an unrelated group.

You have removed your name from the Australian electoral roll.

You have cancelled your Australian private health insurance from the date of departure from Australia.

You have completed overseas electoral role registration with the Australian Electoral Commission.

You will notify your bank that you are a non-resident after you depart Australia and provide them with your new overseas address.

You will change your mailing address to Country B after your relocation is complete.

You have Australian bank accounts and home loans which you intend to maintain.

Once you have set up bank accounts in Country B you will transfer cash funds to those bank accounts.

You have registered your new overseas address with Bank A.

You do not own any Australian shares.

You are not a member of a Commonwealth Superannuation Scheme.

You jointly own two properties with Person A.

Property A is currently available for rent on commercial terms. Previously, this property was used as your home office while you were living in Australia.

Property B is left vacant so that it may be used by Person A when they return to Australia for work. You will dispose of most of your Australian furniture except for some furniture you will retain for Property B.

You have arranged for the sale of your car.

You will take most of your personal effects to Country B.

You have signed a multiple year rental agreement for an apartment in Country B commencing on Date 3. In the medium term, you intend to purchase a property in Country B.

You have engaged an interior designer for your Country B apartment.

Person A runs a clinic in Australia. This will require them to travel back to Australia for work as they need to be there to physically treat their patients. They plan to return to Australia for work for several weeks out of every few months. They have also started hiring additional staff to help take over some of the patient load.

You and Person A have friends and extended family in Country B. You intend to live there indefinitely and raise a family.

You will maintain your sports club membership in Australia. This will allow you reciprocal access to worldwide sports clubs including those in Country B.

You and Person A will obtain memberships of private member's clubs, golf clubs and gyms in Country B.

You will secure long term contracts for utilities in Country B including mobile, phone, internet, and TV subscriptions

You are in the process of obtaining a long-term work visa for Country B. You intend to convert this visa into a permanent resident visa as soon as you are eligible.

As part of your new role, you will be required to return to Australia for board meetings and facilitate handover of your Australian-specific roles and responsibilities.

This will require you to be in Australia for several days per month for the first several months after you leave Australia.

After the above has been completed, as part of your employment role, you will also be required to travel to Australia for several days approximately every few months. You will also be required to spend a similar amount of time in other jurisdictions including Country D, Country E and Country F as your employer also has operations in these jurisdictions.

When you return to Australia, you will stay in hotels or short-term accommodation near your employer's office. This accommodation will be paid for by your employer. The exception to this will be that if you have children, you will probably stay at Unit B a few times a year.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Summary

You are not a resident of Australia for taxation purposes from 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 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 (Miller) 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... 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 case of Mayhew v Federal Commissioner of Taxation [2013] AATA 130 provides some further guidance on how the law set out in Miller should be interpreted. The taxpayer in that case was a long-term resident of Australia who moved overseas in 2007 to commence permanent employment in Abu Dhabi, United Arab Emirates. He established a home in Abu Dhabi and furnished it. His wife remained working in Australia for 16 months (that is, until April 2009) before joining him overseas, and their son remained in their family home in Australia

which was let out to him. Mayhew only returned to Australia twice for business and stayed in hotels.

The Tribunal concluded that Mayhew ceased to reside in Australia from his date of departure and did not consider it to be of significance that his wife did not join him overseas immediately.

We infer from this decision that it is possible for a taxpayer to be treated as a non-resident of Australia from their date of departure where the family remains in Australia for the immediate future or undertakes an independent travel schedule as a result of their individual career aspirations and work commitments.

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 resides test is about 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. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia.

Application to your situation

We have taken the following into consideration when determining whether you meet the resides test for the relevant income years:

•         You intend to reside in Country B indefinitely and are in the process of obtaining a long-term work visa with a view to applying for permanent residency as soon as you qualify

•         You have signed a multiple year lease on an apartment in Country B and plan to purchase a property in Country B in the longer term

•         You have sold most of your furniture in Australia and taken most of your personal effects to Country B

•         You intend to return to Australia for several days per month during the next few months for work related reasons but will spend most of your time in Country B when not travelling for work

•         When you return to Australia for work purposes, you will stay in accommodation paid for by your employer and not at Property B

•         You will notify your Australian bank that you are no longer a resident

•         You have established a bank account in Country B

•         You will take out private club memberships, golf club memberships and gym memberships in Hong Kong

•         You have notified your banks in Australia that you are a non-resident

The Commissioner is satisfied that you have broken your connection with Australia. Therefore, you are a non-resident for Australian tax purposes under the resides 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

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

•         You were born in Country A and moved to Australia at a young age.

•         You are an Australian citizen and do not hold citizenships in any other countries

•         You departed Australia in XX 20XX for Country B and plan to reside there indefinitely

We consider that you established a domicile of dependence in Australia when you moved here as a child with your parents. Therefore, under the domicile test, 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;

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 B indefinitely and are in the process of obtaining a long-term work visa with a view to applying for permanent residency as soon as you qualify

•         You have signed a multiple year lease on an apartment in Country B and plan to purchase a property in Country B in the longer term

•         You have cancelled your private health insurance in Australia and removed yourself from the Australian Electoral Roll

•         You have applied to be added to Country B's Electoral Roll

•         You have sold the majority of your furniture in Australia and have had your personal possessions flown to Country B

•         You have sold your car in Australia

•         Your spouse Person A has travelled with you to Country B and is living with you there

Taking into account the above factors and circumstances, we are satisfied that you have established a permanent place of abode in Country B.

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 will spend less than 183 days in Australia in any given year when you visit Australia for work purposes and later on if and when you have a family. Therefore, we consider that you are a non-resident of Australia for tax purposes 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

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

After considering each of the statutory tests listed above in relation to your particular facts and circumstances, we conclude that for the period from Date two, you are not a resident of Australia for taxation purpose